Correlation Between Lockheed Martin and BlackRock

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

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

Diversification Opportunities for Lockheed Martin and BlackRock

-0.33

Correlation Coefficient

Lockheed Martin  BlackRock

Very good diversification

The 3 months correlation between Lockheed and BlackRock is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and BlackRock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock 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 BlackRock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and BlackRock go up and down completely randomly.

Pair Corralation between Lockheed Martin and BlackRock

Assuming the 90 days trading horizon Lockheed Martin is expected to under-perform the BlackRock. But the stock apears to be less risky and, when comparing its historical volatility, Lockheed Martin is 1.09 times less risky than BlackRock. The stock trades about -0.1 of its potential returns per unit of risk. The BlackRock is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,665,143  in BlackRock on September 17, 2024 and sell it today you would earn a total of  457,057  from holding BlackRock or generate 27.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Lockheed Martin  vs.  BlackRock

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. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

BlackRock

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, BlackRock showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lockheed Martin and BlackRock

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

The idea behind Lockheed Martin and BlackRock 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..