Correlation Between General Dynamics and L3Harris Technologies
Can any of the company-specific risk be diversified away by investing in both General Dynamics 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 General Dynamics and L3Harris Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Dynamics and L3Harris Technologies, you can compare the effects of market volatilities on General Dynamics 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 General Dynamics with a short position of L3Harris Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Dynamics and L3Harris Technologies.
Diversification Opportunities for General Dynamics and L3Harris Technologies
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between General and L3Harris is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding General Dynamics and L3Harris Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L3Harris Technologies and General Dynamics 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 General Dynamics 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 General Dynamics i.e., General Dynamics and L3Harris Technologies go up and down completely randomly.
Pair Corralation between General Dynamics and L3Harris Technologies
Allowing for the 90-day total investment horizon General Dynamics is expected to under-perform the L3Harris Technologies. But the stock apears to be less risky and, when comparing its historical volatility, General Dynamics is 1.09 times less risky than L3Harris Technologies. The stock trades about 0.0 of its potential returns per unit of risk. The L3Harris Technologies is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 20,536 in L3Harris Technologies on November 3, 2024 and sell it today you would earn a total of 665.00 from holding L3Harris Technologies or generate 3.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Dynamics vs. L3Harris Technologies
Performance |
| Timeline |
| General Dynamics |
| L3Harris Technologies |
General Dynamics and L3Harris Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with General Dynamics and L3Harris Technologies
The main advantage of trading using opposite General Dynamics and L3Harris Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Dynamics 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.| General Dynamics vs. Lockheed Martin | General Dynamics vs. Raytheon Technologies Corp | General Dynamics vs. L3Harris Technologies | General Dynamics vs. Huntington Ingalls Industries |
| L3Harris Technologies vs. Lockheed Martin | L3Harris Technologies vs. General Dynamics | L3Harris Technologies vs. Raytheon Technologies Corp | L3Harris Technologies vs. Huntington Ingalls Industries |
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.
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