Correlation Between Lockheed Martin and Dassault Aviation

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

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

Diversification Opportunities for Lockheed Martin and Dassault Aviation

0.61

Correlation Coefficient

Lockheed Martin  Dassault Aviation

Poor diversification

The 3 months correlation between Lockheed and Dassault is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Dassault Aviation SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dassault Aviation 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 Dassault Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dassault Aviation has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Dassault Aviation go up and down completely randomly.

Pair Corralation between Lockheed Martin and Dassault Aviation

Considering the 90-day investment horizon Lockheed Martin is expected to under-perform the Dassault Aviation. But the stock apears to be less risky and, when comparing its historical volatility, Lockheed Martin is 4.19 times less risky than Dassault Aviation. The stock trades about -0.43 of its potential returns per unit of risk. The Dassault Aviation SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  20,230  in Dassault Aviation SA on September 29, 2024 and sell it today you would earn a total of  390.00  from holding Dassault Aviation SA or generate 1.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Lockheed Martin  vs.  Dassault Aviation SA

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 unsteady performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Dassault Aviation

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dassault Aviation SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Dassault Aviation is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lockheed Martin and Dassault Aviation

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

The idea behind Lockheed Martin and Dassault Aviation SA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.