Correlation Between L3Harris Technologies and CPI Aerostructures

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

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

Diversification Opportunities for L3Harris Technologies and CPI Aerostructures

-0.63

Correlation Coefficient

L3Harris Technologies  CPI Aerostructures

Excellent diversification

The 3 months correlation between L3Harris and CPI is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding L3Harris Technologies and CPI Aerostructures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPI Aerostructures 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 CPI Aerostructures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPI Aerostructures has no effect on the direction of L3Harris Technologies i.e., L3Harris Technologies and CPI Aerostructures go up and down completely randomly.

Pair Corralation between L3Harris Technologies and CPI Aerostructures

Considering the 90-day investment horizon L3Harris Technologies is expected to generate 11.03 times less return on investment than CPI Aerostructures. But when comparing it to its historical volatility, L3Harris Technologies is 3.8 times less risky than CPI Aerostructures. It trades about 0.11 of its potential returns per unit of risk. CPI Aerostructures is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  386.00  in CPI Aerostructures on October 23, 2024 and sell it today you would earn a total of  113.00  from holding CPI Aerostructures or generate 29.27% return on investment over 90 days.

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

L3Harris Technologies  vs.  CPI Aerostructures

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 latest uncertain performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

CPI Aerostructures

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CPI Aerostructures are ranked lower than 13 (%) 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.

Pair Trading with L3Harris Technologies and CPI Aerostructures

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

The idea behind L3Harris Technologies and CPI Aerostructures 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.