Correlation Between SLR Investment and Raytheon Technologies

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

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

Diversification Opportunities for SLR Investment and Raytheon Technologies

0.68

Correlation Coefficient

SLR Investment  Raytheon Technologies

Poor diversification

The 3 months correlation between SLR and Raytheon is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding SLR Investment Corp and Raytheon Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies and SLR Investment 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 SLR Investment Corp are associated (or correlated) with Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of SLR Investment i.e., SLR Investment and Raytheon Technologies go up and down completely randomly.

Pair Corralation between SLR Investment and Raytheon Technologies

Assuming the 90 days horizon SLR Investment is expected to generate 5.22 times less return on investment than Raytheon Technologies. But when comparing it to its historical volatility, SLR Investment Corp is 1.26 times less risky than Raytheon Technologies. It trades about 0.03 of its potential returns per unit of risk. Raytheon Technologies Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  11,009  in Raytheon Technologies Corp on December 20, 2024 and sell it today you would earn a total of  1,111  from holding Raytheon Technologies Corp or generate 10.09% return on investment over 90 days.

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

SLR Investment Corp  vs.  Raytheon Technologies Corp

SLR Investment Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SLR Investment Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, SLR Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Raytheon Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Raytheon Technologies Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Raytheon Technologies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with SLR Investment and Raytheon Technologies

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

The idea behind SLR Investment Corp and Raytheon Technologies Corp 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.