Correlation Between L3Harris Technologies and Martin Marietta

Can any of the company-specific risk be diversified away by investing in both L3Harris Technologies and Martin Marietta 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 L3Harris Technologies and Martin Marietta into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between L3Harris Technologies and Martin Marietta Materials, you can compare the effects of market volatilities on L3Harris Technologies and Martin Marietta 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 L3Harris Technologies with a short position of Martin Marietta. Check out your portfolio center. Please also check ongoing floating volatility patterns of L3Harris Technologies and Martin Marietta.

Diversification Opportunities for L3Harris Technologies and Martin Marietta

0.74

Correlation Coefficient

L3Harris Technologies  Martin Marietta

Poor diversification

The 3 months correlation between L3Harris and Martin is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding L3Harris Technologies and Martin Marietta Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Martin Marietta Materials and L3Harris Technologies 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 L3Harris Technologies are associated (or correlated) with Martin Marietta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Martin Marietta Materials has no effect on the direction of L3Harris Technologies i.e., L3Harris Technologies and Martin Marietta go up and down completely randomly.

Pair Corralation between L3Harris Technologies and Martin Marietta

Assuming the 90 days trading horizon L3Harris Technologies is expected to generate 0.74 times more return on investment than Martin Marietta. However, L3Harris Technologies is 1.34 times less risky than Martin Marietta. It trades about -0.17 of its potential returns per unit of risk. Martin Marietta Materials is currently generating about -0.25 per unit of risk. If you would invest  24,021  in L3Harris Technologies on December 4, 2024 and sell it today you would lose (3,120) from holding L3Harris Technologies or give up 12.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	88.71%
Values	Daily Returns

L3Harris Technologies  vs.  Martin Marietta Materials

L3Harris Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days L3Harris Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Martin Marietta Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Martin Marietta Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with L3Harris Technologies and Martin Marietta

The main advantage of trading using opposite L3Harris Technologies and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if L3Harris Technologies position performs unexpectedly, Martin Marietta 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 Martin Marietta will offset losses from the drop in Martin Marietta's long position.

The idea behind L3Harris Technologies and Martin Marietta Materials pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.