Correlation Between L3Harris Technologies and Howmet Aerospace
Can any of the company-specific risk be diversified away by investing in both L3Harris Technologies and Howmet Aerospace 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 Howmet Aerospace into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between L3Harris Technologies and Howmet Aerospace, you can compare the effects of market volatilities on L3Harris Technologies and Howmet Aerospace 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 Howmet Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of L3Harris Technologies and Howmet Aerospace.
Diversification Opportunities for L3Harris Technologies and Howmet Aerospace
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between L3Harris and Howmet is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding L3Harris Technologies and Howmet Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Howmet Aerospace 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 Howmet Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Howmet Aerospace has no effect on the direction of L3Harris Technologies i.e., L3Harris Technologies and Howmet Aerospace go up and down completely randomly.
Pair Corralation between L3Harris Technologies and Howmet Aerospace
Considering the 90-day investment horizon L3Harris Technologies is expected to generate 1.48 times more return on investment than Howmet Aerospace. However, L3Harris Technologies is 1.48 times more volatile than Howmet Aerospace. It trades about 0.39 of its potential returns per unit of risk. Howmet Aerospace is currently generating about 0.55 per unit of risk. If you would invest 21,831 in L3Harris Technologies on March 10, 2025 and sell it today you would earn a total of 2,596 from holding L3Harris Technologies or generate 11.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
L3Harris Technologies vs. Howmet Aerospace
Performance |
| Timeline |
| L3Harris Technologies |
| Howmet Aerospace |
L3Harris Technologies and Howmet Aerospace Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with L3Harris Technologies and Howmet Aerospace
The main advantage of trading using opposite L3Harris Technologies and Howmet Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if L3Harris Technologies position performs unexpectedly, Howmet Aerospace 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 Howmet Aerospace will offset losses from the drop in Howmet Aerospace's long position.| L3Harris Technologies vs. Lockheed Martin | L3Harris Technologies vs. General Dynamics | L3Harris Technologies vs. Raytheon Technologies Corp | L3Harris Technologies vs. Huntington Ingalls Industries |
| Howmet Aerospace vs. Curtiss Wright | Howmet Aerospace vs. Mercury Systems | Howmet Aerospace vs. AAR Corp | Howmet Aerospace vs. Ducommun Incorporated |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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