Correlation Between Transdigm Group and L3Harris Technologies
Can any of the company-specific risk be diversified away by investing in both Transdigm Group 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 Transdigm Group and L3Harris Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transdigm Group Incorporated and L3Harris Technologies, you can compare the effects of market volatilities on Transdigm Group 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 Transdigm Group with a short position of L3Harris Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transdigm Group and L3Harris Technologies.
Diversification Opportunities for Transdigm Group and L3Harris Technologies
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Transdigm and L3Harris is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Transdigm Group Incorporated and L3Harris Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L3Harris Technologies and Transdigm Group 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 Transdigm Group Incorporated 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 Transdigm Group i.e., Transdigm Group and L3Harris Technologies go up and down completely randomly.
Pair Corralation between Transdigm Group and L3Harris Technologies
Considering the 90-day investment horizon Transdigm Group Incorporated is expected to generate 0.97 times more return on investment than L3Harris Technologies. However, Transdigm Group Incorporated is 1.03 times less risky than L3Harris Technologies. It trades about -0.06 of its potential returns per unit of risk. L3Harris Technologies is currently generating about -0.34 per unit of risk. If you would invest 134,002 in Transdigm Group Incorporated on November 18, 2024 and sell it today you would lose (2,583) from holding Transdigm Group Incorporated or give up 1.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transdigm Group Incorporated vs. L3Harris Technologies
Performance |
| Timeline |
| Transdigm Group |
| L3Harris Technologies |
Transdigm Group and L3Harris Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transdigm Group and L3Harris Technologies
The main advantage of trading using opposite Transdigm Group and L3Harris Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transdigm Group 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.| Transdigm Group vs. HEICO | Transdigm Group vs. L3Harris Technologies | Transdigm Group vs. Huntington Ingalls Industries | Transdigm Group vs. AeroVironment |
| 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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