Correlation Between Citigroup and Lockheed Martin

Can any of the company-specific risk be diversified away by investing in both Citigroup and Lockheed Martin 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 Citigroup and Lockheed Martin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and Lockheed Martin, you can compare the effects of market volatilities on Citigroup and Lockheed Martin 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 Citigroup with a short position of Lockheed Martin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Lockheed Martin.

Diversification Opportunities for Citigroup and Lockheed Martin

-0.58

Correlation Coefficient

Citigroup  Lockheed Martin

Excellent diversification

The 3 months correlation between Citigroup and Lockheed is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin and Citigroup 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 Citigroup are associated (or correlated) with Lockheed Martin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lockheed Martin has no effect on the direction of Citigroup i.e., Citigroup and Lockheed Martin go up and down completely randomly.

Pair Corralation between Citigroup and Lockheed Martin

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.28 times more return on investment than Lockheed Martin. However, Citigroup is 1.28 times more volatile than Lockheed Martin. It trades about 0.04 of its potential returns per unit of risk. Lockheed Martin is currently generating about -0.18 per unit of risk. If you would invest  7,016  in Citigroup on September 28, 2024 and sell it today you would earn a total of  59.50  from holding Citigroup or generate 0.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Citigroup  vs.  Lockheed Martin

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Lockheed Martin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lockheed Martin has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Lockheed Martin is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Lockheed Martin

The main advantage of trading using opposite Citigroup and Lockheed Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Lockheed Martin 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 Lockheed Martin will offset losses from the drop in Lockheed Martin's long position.

The idea behind Citigroup and Lockheed Martin 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .