Correlation Between Lockheed Martin and L3Harris Technologies
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin 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 Lockheed Martin and L3Harris Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and L3Harris Technologies, you can compare the effects of market volatilities on Lockheed Martin 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 Lockheed Martin with a short position of L3Harris Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and L3Harris Technologies.
Diversification Opportunities for Lockheed Martin and L3Harris Technologies
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lockheed and L3Harris is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and L3Harris Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L3Harris Technologies and Lockheed Martin 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 Lockheed Martin 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 Lockheed Martin i.e., Lockheed Martin and L3Harris Technologies go up and down completely randomly.
Pair Corralation between Lockheed Martin and L3Harris Technologies
Considering the 90-day investment horizon Lockheed Martin is expected to generate 2.77 times less return on investment than L3Harris Technologies. But when comparing it to its historical volatility, Lockheed Martin is 1.07 times less risky than L3Harris Technologies. It trades about 0.04 of its potential returns per unit of risk. L3Harris Technologies is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 21,303 in L3Harris Technologies on October 23, 2024 and sell it today you would earn a total of 513.00 from holding L3Harris Technologies or generate 2.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lockheed Martin vs. L3Harris Technologies
Performance |
| Timeline |
| Lockheed Martin |
| L3Harris Technologies |
Lockheed Martin and L3Harris Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and L3Harris Technologies
The main advantage of trading using opposite Lockheed Martin and L3Harris Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin 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.| Lockheed Martin vs. Northrop Grumman | Lockheed Martin vs. General Dynamics | Lockheed Martin vs. L3Harris Technologies | Lockheed Martin vs. The Boeing |
| 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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