Correlation Between L3Harris Technologies and Aerojet Rocketdyne

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Can any of the company-specific risk be diversified away by investing in both L3Harris Technologies and Aerojet Rocketdyne 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 Aerojet Rocketdyne into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between L3Harris Technologies and Aerojet Rocketdyne Holdings, you can compare the effects of market volatilities on L3Harris Technologies and Aerojet Rocketdyne 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 Aerojet Rocketdyne. Check out your portfolio center. Please also check ongoing floating volatility patterns of L3Harris Technologies and Aerojet Rocketdyne.

Diversification Opportunities for L3Harris Technologies and Aerojet Rocketdyne

-0.65
  Correlation Coefficient

Excellent diversification

The 3 months correlation between L3Harris and Aerojet is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding L3Harris Technologies and Aerojet Rocketdyne Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerojet Rocketdyne 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 Aerojet Rocketdyne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerojet Rocketdyne has no effect on the direction of L3Harris Technologies i.e., L3Harris Technologies and Aerojet Rocketdyne go up and down completely randomly.

Pair Corralation between L3Harris Technologies and Aerojet Rocketdyne

If you would invest  24,062  in L3Harris Technologies on September 5, 2024 and sell it today you would lose (14.00) from holding L3Harris Technologies or give up 0.06% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy2.38%
ValuesDaily Returns

L3Harris Technologies  vs.  Aerojet Rocketdyne Holdings

 Performance 
       Timeline  
L3Harris Technologies 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in L3Harris Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, L3Harris Technologies is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.
Aerojet Rocketdyne 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Aerojet Rocketdyne Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Aerojet Rocketdyne is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

L3Harris Technologies and Aerojet Rocketdyne Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with L3Harris Technologies and Aerojet Rocketdyne

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

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