Correlation Between Lockheed Martin and Hensoldt

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

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

Diversification Opportunities for Lockheed Martin and Hensoldt

-0.55

Correlation Coefficient

Lockheed Martin  Hensoldt

Excellent diversification

The 3 months correlation between Lockheed and Hensoldt is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Hensoldt AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hensoldt AG 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 Hensoldt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hensoldt AG has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Hensoldt go up and down completely randomly.

Pair Corralation between Lockheed Martin and Hensoldt

Considering the 90-day investment horizon Lockheed Martin is expected to generate 1.79 times less return on investment than Hensoldt. But when comparing it to its historical volatility, Lockheed Martin is 1.74 times less risky than Hensoldt. It trades about 0.01 of its potential returns per unit of risk. Hensoldt AG is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,660  in Hensoldt AG on October 10, 2024 and sell it today you would earn a total of  40.00  from holding Hensoldt AG or generate 1.09% 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.  Hensoldt AG

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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Hensoldt AG

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hensoldt AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Hensoldt may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Lockheed Martin and Hensoldt

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

The idea behind Lockheed Martin and Hensoldt AG 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 Commodity Directory module to find actively traded commodities issued by global exchanges.