Correlation Between Lockheed Martin and Goldman Sachs

Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and Goldman Sachs 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 Goldman Sachs 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 Goldman Sachs, you can compare the effects of market volatilities on Lockheed Martin and Goldman Sachs 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 Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and Goldman Sachs.

Diversification Opportunities for Lockheed Martin and Goldman Sachs

-0.47

Correlation Coefficient

Lockheed Martin  Goldman Sachs

Very good diversification

The 3 months correlation between Lockheed and Goldman is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and The Goldman Sachs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Goldman Sachs go up and down completely randomly.

Pair Corralation between Lockheed Martin and Goldman Sachs

Assuming the 90 days trading horizon Lockheed Martin is expected to under-perform the Goldman Sachs. But the stock apears to be less risky and, when comparing its historical volatility, Lockheed Martin is 1.51 times less risky than Goldman Sachs. The stock trades about -0.1 of its potential returns per unit of risk. The The Goldman Sachs is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  929,374  in The Goldman Sachs on September 17, 2024 and sell it today you would earn a total of  249,226  from holding The Goldman Sachs or generate 26.82% return on investment over 90 days.

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

Lockheed Martin  vs.  The Goldman Sachs

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.

Goldman Sachs

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Goldman Sachs are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Goldman Sachs showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lockheed Martin and Goldman Sachs

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

The idea behind Lockheed Martin and The Goldman Sachs 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.