Correlation Between MTU Aero and L3Harris Technologies
Can any of the company-specific risk be diversified away by investing in both MTU Aero 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 MTU Aero and L3Harris Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MTU Aero Engines and L3Harris Technologies, you can compare the effects of market volatilities on MTU Aero 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 MTU Aero with a short position of L3Harris Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTU Aero and L3Harris Technologies.
Diversification Opportunities for MTU Aero and L3Harris Technologies
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MTU and L3Harris is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding MTU Aero Engines and L3Harris Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L3Harris Technologies and MTU Aero 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 MTU Aero Engines 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 MTU Aero i.e., MTU Aero and L3Harris Technologies go up and down completely randomly.
Pair Corralation between MTU Aero and L3Harris Technologies
Assuming the 90 days horizon MTU Aero Engines is expected to generate 0.82 times more return on investment than L3Harris Technologies. However, MTU Aero Engines is 1.21 times less risky than L3Harris Technologies. It trades about 0.13 of its potential returns per unit of risk. L3Harris Technologies is currently generating about 0.01 per unit of risk. If you would invest 16,368 in MTU Aero Engines on September 1, 2024 and sell it today you would earn a total of 607.00 from holding MTU Aero Engines or generate 3.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MTU Aero Engines vs. L3Harris Technologies
Performance |
| Timeline |
| MTU Aero Engines |
| L3Harris Technologies |
MTU Aero and L3Harris Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MTU Aero and L3Harris Technologies
The main advantage of trading using opposite MTU Aero and L3Harris Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTU Aero 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.| MTU Aero vs. Firan Technology Group | MTU Aero vs. 808 Renewable Energy | MTU Aero vs. Park Electrochemical | MTU Aero vs. Innovative Solutions and |
| 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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