Correlation Between Alphabet and L3Harris Technologies

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

Diversification Opportunities for Alphabet and L3Harris Technologies

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between Alphabet and L3Harris is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Cl A and L3Harris Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L3Harris Technologies and Alphabet 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 Alphabet Cl A 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 Alphabet i.e., Alphabet and L3Harris Technologies go up and down completely randomly.

Pair Corralation between Alphabet and L3Harris Technologies

Assuming the 90 days horizon Alphabet Cl A is expected to generate 1.22 times more return on investment than L3Harris Technologies. However, Alphabet is 1.22 times more volatile than L3Harris Technologies. It trades about 0.03 of its potential returns per unit of risk. L3Harris Technologies is currently generating about 0.03 per unit of risk. If you would invest  7,823  in Alphabet Cl A on July 3, 2022 and sell it today you would earn a total of  1,742  from holding Alphabet Cl A or generate 22.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Alphabet Cl A  vs.  L3Harris Technologies

 Performance (%) 
       Timeline  
Alphabet Cl A 
Alphabet Performance
0 of 100
Over the last 90 days Alphabet Cl A has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's technical and fundamental indicators remain relatively steady which may send shares a bit higher in November 2022. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Alphabet 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 latest conflicting performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

L3Harris Price Channel

Alphabet and L3Harris Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alphabet and L3Harris Technologies

The main advantage of trading using opposite Alphabet and L3Harris Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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.
Alphabet vs. Tencent Holdings
The idea behind Alphabet Cl A 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.
L3Harris Technologies vs. Amazon Inc
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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