Correlation Between L3Harris Technologies and AAR Corp

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

Diversification Opportunities for L3Harris Technologies and AAR Corp

0.57
  Correlation Coefficient

Very weak diversification

The 3 months correlation between L3Harris and AAR Corp is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding L3Harris Technologies and AAR Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAR Corp and L3Harris Technologies 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 L3Harris Technologies are associated (or correlated) with AAR Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAR Corp has no effect on the direction of L3Harris Technologies i.e., L3Harris Technologies and AAR Corp go up and down completely randomly.

Pair Corralation between L3Harris Technologies and AAR Corp

Considering the 90-day investment horizon L3Harris Technologies is expected to generate 2.01 times less return on investment than AAR Corp. But when comparing it to its historical volatility, L3Harris Technologies is 1.21 times less risky than AAR Corp. It trades about 0.06 of its potential returns per unit of risk. AAR Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4,309  in AAR Corp on May 15, 2022 and sell it today you would earn a total of  401.00  from holding AAR Corp or generate 9.31% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

L3Harris Technologies  vs.  AAR Corp

 Performance (%) 
       Timeline  
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 current stock price disturbance, may contribute to short-term losses for the investors.

L3Harris Price Channel

AAR Corp 
AAR Corp Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in AAR Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, AAR Corp is not utilizing all of its potentials. The new stock price agitation, may contribute to short-term losses for the retail investors.

AAR Corp Price Channel

L3Harris Technologies and AAR Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with L3Harris Technologies and AAR Corp

The main advantage of trading using opposite L3Harris Technologies and AAR Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if L3Harris Technologies position performs unexpectedly, AAR Corp 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 AAR Corp will offset losses from the drop in AAR Corp's long position.
The idea behind L3Harris Technologies and AAR Corp 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 Piotroski F Score module to get Piotroski F Score based on binary analysis strategy of nine different fundamentals.

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