Correlation Between Lockheed Martin and Qinetiq Group

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

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

Diversification Opportunities for Lockheed Martin and Qinetiq Group

0.08

Correlation Coefficient

Lockheed Martin  Qinetiq Group

Significant diversification

The 3 months correlation between Lockheed and Qinetiq is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Qinetiq Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qinetiq Group PLC 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 Qinetiq Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qinetiq Group PLC has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Qinetiq Group go up and down completely randomly.

Pair Corralation between Lockheed Martin and Qinetiq Group

Considering the 90-day investment horizon Lockheed Martin is expected to under-perform the Qinetiq Group. But the stock apears to be less risky and, when comparing its historical volatility, Lockheed Martin is 2.45 times less risky than Qinetiq Group. The stock trades about -0.06 of its potential returns per unit of risk. The Qinetiq Group PLC is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,087  in Qinetiq Group PLC on December 29, 2024 and sell it today you would earn a total of  4.00  from holding Qinetiq Group PLC or generate 0.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Lockheed Martin  vs.  Qinetiq Group PLC

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.

Qinetiq Group PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Qinetiq Group PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Qinetiq Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Lockheed Martin and Qinetiq Group

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

The idea behind Lockheed Martin and Qinetiq Group PLC 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.