Correlation Between Aeorema Communications and L3Harris Technologies

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

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

Diversification Opportunities for Aeorema Communications and L3Harris Technologies

-0.76

Correlation Coefficient

Aeorema Communications  L3Harris Technologies

Pay attention - limited upside

The 3 months correlation between Aeorema and L3Harris is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Aeorema Communications Plc and L3Harris Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L3Harris Technologies and Aeorema Communications 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 Aeorema Communications Plc are associated (or correlated) with L3Harris Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L3Harris Technologies has no effect on the direction of Aeorema Communications i.e., Aeorema Communications and L3Harris Technologies go up and down completely randomly.

Pair Corralation between Aeorema Communications and L3Harris Technologies

Assuming the 90 days trading horizon Aeorema Communications Plc is expected to generate 0.78 times more return on investment than L3Harris Technologies. However, Aeorema Communications Plc is 1.28 times less risky than L3Harris Technologies. It trades about 0.13 of its potential returns per unit of risk. L3Harris Technologies is currently generating about -0.03 per unit of risk. If you would invest  5,250  in Aeorema Communications Plc on September 4, 2024 and sell it today you would earn a total of  200.00  from holding Aeorema Communications Plc or generate 3.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Aeorema Communications Plc  vs.  L3Harris Technologies

Aeorema Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeorema Communications Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

L3Harris Technologies

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in L3Harris Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, L3Harris Technologies is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Aeorema Communications and L3Harris Technologies

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

The idea behind Aeorema Communications Plc and L3Harris Technologies 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.