Correlation Between London Security and L3Harris Technologies

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

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

Diversification Opportunities for London Security and L3Harris Technologies

0.33

Correlation Coefficient

London Security  L3Harris Technologies

Weak diversification

The 3 months correlation between London and L3Harris is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding London Security Plc and L3Harris Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L3Harris Technologies and London Security 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 London Security 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 London Security i.e., London Security and L3Harris Technologies go up and down completely randomly.

Pair Corralation between London Security and L3Harris Technologies

Assuming the 90 days trading horizon London Security Plc is expected to generate 0.95 times more return on investment than L3Harris Technologies. However, London Security Plc is 1.05 times less risky than L3Harris Technologies. It trades about 0.21 of its potential returns per unit of risk. L3Harris Technologies is currently generating about -0.54 per unit of risk. If you would invest  325,000  in London Security Plc on September 26, 2024 and sell it today you would earn a total of  15,000  from holding London Security Plc or generate 4.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

London Security Plc  vs.  L3Harris Technologies

London Security Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days London Security Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

L3Harris Technologies

Risk-Adjusted Performance

0 of 100

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with London Security and L3Harris Technologies

The main advantage of trading using opposite London Security and L3Harris Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Security 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 London Security 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.