Correlation Between L3Harris Technologies and TechnipFMC PLC
Can any of the company-specific risk be diversified away by investing in both L3Harris Technologies and TechnipFMC PLC 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 L3Harris Technologies and TechnipFMC PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between L3Harris Technologies and TechnipFMC PLC, you can compare the effects of market volatilities on L3Harris Technologies and TechnipFMC PLC 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 L3Harris Technologies with a short position of TechnipFMC PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of L3Harris Technologies and TechnipFMC PLC.
Diversification Opportunities for L3Harris Technologies and TechnipFMC PLC
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between L3Harris and TechnipFMC is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding L3Harris Technologies and TechnipFMC PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TechnipFMC PLC and L3Harris 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 L3Harris Technologies are associated (or correlated) with TechnipFMC PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TechnipFMC PLC has no effect on the direction of L3Harris Technologies i.e., L3Harris Technologies and TechnipFMC PLC go up and down completely randomly.
Pair Corralation between L3Harris Technologies and TechnipFMC PLC
Assuming the 90 days trading horizon L3Harris Technologies is expected to generate 31.83 times less return on investment than TechnipFMC PLC. But when comparing it to its historical volatility, L3Harris Technologies is 1.03 times less risky than TechnipFMC PLC. It trades about 0.02 of its potential returns per unit of risk. TechnipFMC PLC is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest 2,402 in TechnipFMC PLC on August 31, 2024 and sell it today you would earn a total of 558.00 from holding TechnipFMC PLC or generate 23.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
L3Harris Technologies vs. TechnipFMC PLC
Performance |
| Timeline |
| L3Harris Technologies |
| TechnipFMC PLC |
L3Harris Technologies and TechnipFMC PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with L3Harris Technologies and TechnipFMC PLC
The main advantage of trading using opposite L3Harris Technologies and TechnipFMC PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if L3Harris Technologies position performs unexpectedly, TechnipFMC PLC 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 TechnipFMC PLC will offset losses from the drop in TechnipFMC PLC's long position.| L3Harris Technologies vs. Monks Investment Trust | L3Harris Technologies vs. Broadridge Financial Solutions | L3Harris Technologies vs. Smithson Investment Trust | L3Harris Technologies vs. Trainline Plc |
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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