Correlation Between Raytheon Technologies and Lennar

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

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

Diversification Opportunities for Raytheon Technologies and Lennar

-0.23

Correlation Coefficient

Raytheon Technologies  Lennar

Very good diversification

The 3 months correlation between Raytheon and Lennar is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Raytheon Technologies and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar and Raytheon 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 Raytheon Technologies are associated (or correlated) with Lennar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar has no effect on the direction of Raytheon Technologies i.e., Raytheon Technologies and Lennar go up and down completely randomly.

Pair Corralation between Raytheon Technologies and Lennar

Assuming the 90 days trading horizon Raytheon Technologies is expected to generate 0.65 times more return on investment than Lennar. However, Raytheon Technologies is 1.54 times less risky than Lennar. It trades about 0.06 of its potential returns per unit of risk. Lennar is currently generating about -0.14 per unit of risk. If you would invest  11,353  in Raytheon Technologies on October 8, 2024 and sell it today you would earn a total of  577.00  from holding Raytheon Technologies or generate 5.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Raytheon Technologies  vs.  Lennar

Raytheon Technologies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Raytheon Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Raytheon Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lennar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lennar has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Raytheon Technologies and Lennar

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

The idea behind Raytheon Technologies and Lennar 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.