Correlation Between Heico and L3Harris Technologies

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

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

Diversification Opportunities for Heico and L3Harris Technologies

0.25

Correlation Coefficient

Heico  L3Harris Technologies

Modest diversification

The 3 months correlation between Heico and L3Harris is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Heico and L3Harris Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L3Harris Technologies and Heico 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 Heico 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 Heico i.e., Heico and L3Harris Technologies go up and down completely randomly.

Pair Corralation between Heico and L3Harris Technologies

Considering the 90-day investment horizon Heico is expected to generate 1.02 times more return on investment than L3Harris Technologies. However, Heico is 1.02 times more volatile than L3Harris Technologies. It trades about 0.12 of its potential returns per unit of risk. L3Harris Technologies is currently generating about 0.07 per unit of risk. If you would invest  24,774  in Heico on September 2, 2024 and sell it today you would earn a total of  2,563  from holding Heico or generate 10.35% return on investment over 90 days.

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

Heico  vs.  L3Harris Technologies

Heico

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heico are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, Heico may actually be approaching a critical reversion point that can send shares even higher in January 2025.

L3Harris Technologies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in L3Harris Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Heico and L3Harris Technologies

The main advantage of trading using opposite Heico and L3Harris Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heico 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 Heico 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.