Correlation Between Lockheed Martin and Boeing

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

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

Diversification Opportunities for Lockheed Martin and Boeing

-0.54

Correlation Coefficient

Lockheed Martin  Boeing

Excellent diversification

The 3 months correlation between Lockheed and Boeing is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing 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 are associated (or correlated) with Boeing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boeing has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Boeing go up and down completely randomly.

Pair Corralation between Lockheed Martin and Boeing

Assuming the 90 days trading horizon Lockheed Martin is expected to generate 0.71 times more return on investment than Boeing. However, Lockheed Martin is 1.41 times less risky than Boeing. It trades about 0.04 of its potential returns per unit of risk. The Boeing is currently generating about -0.03 per unit of risk. If you would invest  1,063,753  in Lockheed Martin on September 2, 2024 and sell it today you would earn a total of  31,896  from holding Lockheed Martin or generate 3.0% return on investment over 90 days.

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

Lockheed Martin  vs.  The Boeing

Lockheed Martin

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lockheed Martin are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly 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.

Boeing

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lockheed Martin and Boeing

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

The idea behind Lockheed Martin and The Boeing 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.