Correlation Between Boeing and L3Harris Technologies

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Can any of the company-specific risk be diversified away by investing in both Boeing 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 Boeing and L3Harris Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boeing Company and L3Harris Technologies, you can compare the effects of market volatilities on Boeing 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 Boeing with a short position of L3Harris Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boeing and L3Harris Technologies.

Diversification Opportunities for Boeing and L3Harris Technologies

-0.09
  Correlation Coefficient

Good diversification

The 3 months correlation between Boeing and L3Harris is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Boeing Company and L3Harris Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L3Harris Technologies and Boeing 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 Boeing Company 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 Boeing i.e., Boeing and L3Harris Technologies go up and down completely randomly.

Pair Corralation between Boeing and L3Harris Technologies

Allowing for the 90-day total investment horizon Boeing Company is expected to generate 1.56 times more return on investment than L3Harris Technologies. However, Boeing is 1.56 times more volatile than L3Harris Technologies. It trades about 0.34 of its potential returns per unit of risk. L3Harris Technologies is currently generating about -0.04 per unit of risk. If you would invest  13,699  in Boeing Company on May 10, 2022 and sell it today you would earn a total of  2,805  from holding Boeing Company or generate 20.48% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Boeing Company  vs.  L3Harris Technologies

 Performance (%) 
       Timeline  
Boeing Company 
Boeing Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Boeing Company are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Boeing sustained solid returns over the last few months and may actually be approaching a breakup point.

Boeing Price Channel

L3Harris Technologies 
L3Harris Performance
0 of 100
Over the last 90 days L3Harris Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, L3Harris Technologies is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

L3Harris Price Channel

Boeing and L3Harris Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Boeing and L3Harris Technologies

The main advantage of trading using opposite Boeing and L3Harris Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing 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.
The idea behind Boeing Company and L3Harris Technologies pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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