Correlation Between L3Harris Technologies and HEICO

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

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

Diversification Opportunities for L3Harris Technologies and HEICO

0.34

Correlation Coefficient

L3Harris Technologies  HEICO

Weak diversification

The 3 months correlation between L3Harris and HEICO is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding L3Harris Technologies and HEICO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEICO 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 HEICO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEICO has no effect on the direction of L3Harris Technologies i.e., L3Harris Technologies and HEICO go up and down completely randomly.

Pair Corralation between L3Harris Technologies and HEICO

Considering the 90-day investment horizon L3Harris Technologies is expected to generate 22.75 times less return on investment than HEICO. But when comparing it to its historical volatility, L3Harris Technologies is 1.55 times less risky than HEICO. It trades about 0.01 of its potential returns per unit of risk. HEICO is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  18,687  in HEICO on December 29, 2024 and sell it today you would earn a total of  2,262  from holding HEICO or generate 12.1% return on investment over 90 days.

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

L3Harris Technologies  vs.  HEICO

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 fairly strong technical indicators, L3Harris Technologies is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

HEICO

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HEICO are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, HEICO sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with L3Harris Technologies and HEICO

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

The idea behind L3Harris Technologies and HEICO 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.