Correlation Between Northrop Grumman and Transdigm Group
Can any of the company-specific risk be diversified away by investing in both Northrop Grumman and Transdigm Group at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Northrop Grumman and Transdigm Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northrop Grumman and Transdigm Group Incorporated, you can compare the effects of market volatilities on Northrop Grumman and Transdigm Group and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Northrop Grumman with a short position of Transdigm Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northrop Grumman and Transdigm Group.
Diversification Opportunities for Northrop Grumman and Transdigm Group
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Northrop and Transdigm is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Northrop Grumman and Transdigm Group Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transdigm Group and Northrop Grumman is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Northrop Grumman are associated (or correlated) with Transdigm Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transdigm Group has no effect on the direction of Northrop Grumman i.e., Northrop Grumman and Transdigm Group go up and down completely randomly.
Pair Corralation between Northrop Grumman and Transdigm Group
Considering the 90-day investment horizon Northrop Grumman is expected to under-perform the Transdigm Group. But the stock apears to be less risky and, when comparing its historical volatility, Northrop Grumman is 1.12 times less risky than Transdigm Group. The stock trades about -0.07 of its potential returns per unit of risk. The Transdigm Group Incorporated is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 127,104 in Transdigm Group Incorporated on September 5, 2025 and sell it today you would earn a total of 6,629 from holding Transdigm Group Incorporated or generate 5.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northrop Grumman vs. Transdigm Group Incorporated
Performance |
| Timeline |
| Northrop Grumman |
| Transdigm Group |
Northrop Grumman and Transdigm Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northrop Grumman and Transdigm Group
The main advantage of trading using opposite Northrop Grumman and Transdigm Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northrop Grumman position performs unexpectedly, Transdigm Group can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Transdigm Group will offset losses from the drop in Transdigm Group's long position.| Northrop Grumman vs. Alternative Investment | Northrop Grumman vs. AG Mortgage Investment | Northrop Grumman vs. AG Mortgage Investment | Northrop Grumman vs. Shenzhen Investment Holdings |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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