Correlation Between Charter Communications and Lockheed Martin

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

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

Diversification Opportunities for Charter Communications and Lockheed Martin

0.58

Correlation Coefficient

Charter Communications  Lockheed Martin

Very weak diversification

The 3 months correlation between Charter and Lockheed is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin and Charter Communications 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 Charter Communications 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 Charter Communications i.e., Charter Communications and Lockheed Martin go up and down completely randomly.

Pair Corralation between Charter Communications and Lockheed Martin

Assuming the 90 days trading horizon Charter Communications is expected to generate 1.1 times more return on investment than Lockheed Martin. However, Charter Communications is 1.1 times more volatile than Lockheed Martin. It trades about -0.01 of its potential returns per unit of risk. Lockheed Martin is currently generating about -0.14 per unit of risk. If you would invest  3,608  in Charter Communications on December 26, 2024 and sell it today you would lose (85.00) from holding Charter Communications or give up 2.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Charter Communications  vs.  Lockheed Martin

Charter Communications

Risk-Adjusted Performance

Very Weak

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

Lockheed Martin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lockheed Martin has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Charter Communications and Lockheed Martin

The main advantage of trading using opposite Charter Communications and Lockheed Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charter Communications 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 Charter Communications 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.