Correlation Between CPI Aerostructures and L3Harris Technologies

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

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

Diversification Opportunities for CPI Aerostructures and L3Harris Technologies

-0.76

Correlation Coefficient

CPI Aerostructures  L3Harris Technologies

Pay attention - limited upside

The 3 months correlation between CPI and L3Harris is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding CPI Aerostructures and L3Harris Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L3Harris Technologies and CPI Aerostructures 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 CPI Aerostructures 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 CPI Aerostructures i.e., CPI Aerostructures and L3Harris Technologies go up and down completely randomly.

Pair Corralation between CPI Aerostructures and L3Harris Technologies

Considering the 90-day investment horizon CPI Aerostructures is expected to generate 2.61 times more return on investment than L3Harris Technologies. However, CPI Aerostructures is 2.61 times more volatile than L3Harris Technologies. It trades about 0.35 of its potential returns per unit of risk. L3Harris Technologies is currently generating about -0.46 per unit of risk. If you would invest  363.00  in CPI Aerostructures on October 8, 2024 and sell it today you would earn a total of  68.00  from holding CPI Aerostructures or generate 18.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

CPI Aerostructures  vs.  L3Harris Technologies

CPI Aerostructures

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CPI Aerostructures are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, CPI Aerostructures unveiled solid returns over the last few months and may actually be approaching a breakup point.

L3Harris Technologies

Risk-Adjusted Performance

0 of 100

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 technical indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with CPI Aerostructures and L3Harris Technologies

The main advantage of trading using opposite CPI Aerostructures and L3Harris Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CPI Aerostructures 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 CPI Aerostructures 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.