Correlation Between London Security and Raytheon Technologies
Can any of the company-specific risk be diversified away by investing in both London Security and Raytheon 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 Raytheon 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 Raytheon Technologies Corp, you can compare the effects of market volatilities on London Security and Raytheon 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 Raytheon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of London Security and Raytheon Technologies.
Diversification Opportunities for London Security and Raytheon Technologies
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between London and Raytheon is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding London Security Plc and Raytheon Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon 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 Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of London Security i.e., London Security and Raytheon Technologies go up and down completely randomly.
Pair Corralation between London Security and Raytheon Technologies
Assuming the 90 days trading horizon London Security Plc is expected to under-perform the Raytheon Technologies. In addition to that, London Security is 1.44 times more volatile than Raytheon Technologies Corp. It trades about -0.21 of its total potential returns per unit of risk. Raytheon Technologies Corp is currently generating about 0.0 per unit of volatility. If you would invest 12,108 in Raytheon Technologies Corp on September 1, 2024 and sell it today you would lose (31.00) from holding Raytheon Technologies Corp or give up 0.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
London Security Plc vs. Raytheon Technologies Corp
Performance |
| Timeline |
| London Security Plc |
| Raytheon Technologies |
London Security and Raytheon Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with London Security and Raytheon Technologies
The main advantage of trading using opposite London Security and Raytheon Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Security position performs unexpectedly, Raytheon 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 Raytheon Technologies will offset losses from the drop in Raytheon Technologies' long position.| London Security vs. Samsung Electronics Co | London Security vs. Samsung Electronics Co | London Security vs. Hyundai Motor | London Security vs. Toyota Motor Corp |
| Raytheon Technologies vs. Uniper SE | Raytheon Technologies vs. Mulberry Group PLC | Raytheon Technologies vs. London Security Plc | Raytheon Technologies vs. Triad Group PLC |
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 CEOs Directory module to screen CEOs from public companies around the world.
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