Correlation Between Lockheed Martin and Planet Labs

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

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

Diversification Opportunities for Lockheed Martin and Planet Labs

-0.47

Correlation Coefficient

Lockheed Martin  Planet Labs

Very good diversification

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

Pair Corralation between Lockheed Martin and Planet Labs

Considering the 90-day investment horizon Lockheed Martin is expected to under-perform the Planet Labs. But the stock apears to be less risky and, when comparing its historical volatility, Lockheed Martin is 3.1 times less risky than Planet Labs. The stock trades about -0.06 of its potential returns per unit of risk. The Planet Labs PBC is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  421.00  in Planet Labs PBC on December 29, 2024 and sell it today you would lose (49.00) from holding Planet Labs PBC or give up 11.64% of portfolio value over 90 days.

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

Lockheed Martin  vs.  Planet Labs PBC

Lockheed Martin

Risk-Adjusted Performance

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 unsteady performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Planet Labs PBC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Planet Labs PBC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Planet Labs is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Lockheed Martin and Planet Labs

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

The idea behind Lockheed Martin and Planet Labs PBC 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.

Check out your portfolio center.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.