Correlation Between Lockheed Martin and L3Harris Technologies

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

Diversification Opportunities for Lockheed Martin and L3Harris Technologies

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Lockheed and L3Harris is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin Corp and L3Harris Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L3Harris Technologies and Lockheed Martin 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 Lockheed Martin Corp 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 Lockheed Martin i.e., Lockheed Martin and L3Harris Technologies go up and down completely randomly.

Pair Corralation between Lockheed Martin and L3Harris Technologies

Considering the 90-day investment horizon Lockheed Martin Corp is expected to under-perform the L3Harris Technologies. In addition to that, Lockheed Martin is 1.05 times more volatile than L3Harris Technologies. It trades about -0.13 of its total potential returns per unit of risk. L3Harris Technologies is currently generating about -0.04 per unit of volatility. If you would invest  23,978  in L3Harris Technologies on March 31, 2022 and sell it today you would lose (415.00)  from holding L3Harris Technologies or give up 1.73% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.24%
ValuesDaily Returns

Lockheed Martin Corp  vs.  L3Harris Technologies

 Performance (%) 
      Timeline 
Lockheed Martin Corp 
Lockheed Performance
0 of 100
Over the last 90 days Lockheed Martin Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Lockheed Martin is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Lockheed 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 current stock price disturbance, may contribute to short-term losses for the investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0196
Payout Ratio
0.33
Last Split Factor
10000:9448
Forward Annual Dividend Rate
4.48
Dividend Date
2022-06-17
Ex Dividend Date
2022-06-02
Last Split Date
2009-05-11

L3Harris Price Channel

Lockheed Martin and L3Harris Technologies Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Lockheed Martin and L3Harris Technologies

The main advantage of trading using opposite Lockheed Martin and L3Harris Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin 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 Lockheed Martin Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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