Correlation Between L3Harris Technologies and Qinetiq Group

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

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

Diversification Opportunities for L3Harris Technologies and Qinetiq Group

0.06

Correlation Coefficient

L3Harris Technologies  Qinetiq Group

Significant diversification

The 3 months correlation between L3Harris and Qinetiq is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding L3Harris Technologies and Qinetiq Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qinetiq Group PLC 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 Qinetiq Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qinetiq Group PLC has no effect on the direction of L3Harris Technologies i.e., L3Harris Technologies and Qinetiq Group go up and down completely randomly.

Pair Corralation between L3Harris Technologies and Qinetiq Group

Considering the 90-day investment horizon L3Harris Technologies is expected to generate 0.49 times more return on investment than Qinetiq Group. However, L3Harris Technologies is 2.02 times less risky than Qinetiq Group. It trades about -0.4 of its potential returns per unit of risk. Qinetiq Group PLC is currently generating about -0.2 per unit of risk. If you would invest  26,049  in L3Harris Technologies on September 13, 2024 and sell it today you would lose (3,162) from holding L3Harris Technologies or give up 12.14% of portfolio value over 90 days.

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

L3Harris Technologies  vs.  Qinetiq Group PLC

L3Harris Technologies

Risk-Adjusted Performance

0 of 100

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 newest stock price disturbance, may contribute to short-term losses for the investors.

Qinetiq Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Qinetiq Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with L3Harris Technologies and Qinetiq Group

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

The idea behind L3Harris Technologies and Qinetiq Group PLC 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.