Correlation Between QinetiQ Group and L3Harris Technologies

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

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

Diversification Opportunities for QinetiQ Group and L3Harris Technologies

0.28

Correlation Coefficient

QinetiQ Group  L3Harris Technologies

Modest diversification

The 3 months correlation between QinetiQ and L3Harris is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding QinetiQ Group plc and L3Harris Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L3Harris Technologies and QinetiQ Group 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 QinetiQ Group plc 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 QinetiQ Group i.e., QinetiQ Group and L3Harris Technologies go up and down completely randomly.

Pair Corralation between QinetiQ Group and L3Harris Technologies

Assuming the 90 days horizon QinetiQ Group plc is expected to generate 3.87 times more return on investment than L3Harris Technologies. However, QinetiQ Group is 3.87 times more volatile than L3Harris Technologies. It trades about 0.07 of its potential returns per unit of risk. L3Harris Technologies is currently generating about 0.01 per unit of risk. If you would invest  477.00  in QinetiQ Group plc on December 29, 2024 and sell it today you would earn a total of  68.00  from holding QinetiQ Group plc or generate 14.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.72%
Values	Daily Returns

QinetiQ Group plc  vs.  L3Harris Technologies

QinetiQ Group plc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in QinetiQ Group plc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, QinetiQ Group reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with QinetiQ Group and L3Harris Technologies

The main advantage of trading using opposite QinetiQ Group and L3Harris Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if QinetiQ Group 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 QinetiQ Group plc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.