Correlation Between L3Harris Technologies and Ducommun Incorporated
Can any of the company-specific risk be diversified away by investing in both L3Harris Technologies and Ducommun Incorporated 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 Ducommun Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between L3Harris Technologies and Ducommun Incorporated, you can compare the effects of market volatilities on L3Harris Technologies and Ducommun Incorporated 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 Ducommun Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of L3Harris Technologies and Ducommun Incorporated.
Diversification Opportunities for L3Harris Technologies and Ducommun Incorporated
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between L3Harris and Ducommun is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding L3Harris Technologies and Ducommun Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ducommun Incorporated 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 Ducommun Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ducommun Incorporated has no effect on the direction of L3Harris Technologies i.e., L3Harris Technologies and Ducommun Incorporated go up and down completely randomly.
Pair Corralation between L3Harris Technologies and Ducommun Incorporated
Considering the 90-day investment horizon L3Harris Technologies is expected to generate 2.25 times less return on investment than Ducommun Incorporated. But when comparing it to its historical volatility, L3Harris Technologies is 1.53 times less risky than Ducommun Incorporated. It trades about 0.03 of its potential returns per unit of risk. Ducommun Incorporated is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4,819 in Ducommun Incorporated on August 24, 2024 and sell it today you would earn a total of 1,809 from holding Ducommun Incorporated or generate 37.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
L3Harris Technologies vs. Ducommun Incorporated
Performance |
| Timeline |
| L3Harris Technologies |
| Ducommun Incorporated |
L3Harris Technologies and Ducommun Incorporated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with L3Harris Technologies and Ducommun Incorporated
The main advantage of trading using opposite L3Harris Technologies and Ducommun Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if L3Harris Technologies position performs unexpectedly, Ducommun Incorporated 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 Ducommun Incorporated will offset losses from the drop in Ducommun Incorporated's long position.| L3Harris Technologies vs. Lockheed Martin | L3Harris Technologies vs. General Dynamics | L3Harris Technologies vs. Raytheon Technologies Corp | L3Harris Technologies vs. Huntington Ingalls Industries |
| Ducommun Incorporated vs. Innovative Solutions and | Ducommun Incorporated vs. National Presto Industries | Ducommun Incorporated vs. Astronics | Ducommun Incorporated vs. Park Electrochemical |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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