Correlation Between Lockheed Martin and Virgin Galactic

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

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

Diversification Opportunities for Lockheed Martin and Virgin Galactic

0.52

Correlation Coefficient

Lockheed Martin  Virgin Galactic

Very weak diversification

The 3 months correlation between Lockheed and Virgin is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Virgin Galactic Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Galactic Holdings 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 Virgin Galactic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Galactic Holdings has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Virgin Galactic go up and down completely randomly.

Pair Corralation between Lockheed Martin and Virgin Galactic

Considering the 90-day investment horizon Lockheed Martin is expected to generate 0.39 times more return on investment than Virgin Galactic. However, Lockheed Martin is 2.53 times less risky than Virgin Galactic. It trades about -0.06 of its potential returns per unit of risk. Virgin Galactic Holdings is currently generating about -0.18 per unit of risk. If you would invest  47,983  in Lockheed Martin on December 29, 2024 and sell it today you would lose (3,755) from holding Lockheed Martin or give up 7.83% of portfolio value over 90 days.

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

Lockheed Martin  vs.  Virgin Galactic Holdings

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.

Virgin Galactic Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virgin Galactic Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Lockheed Martin and Virgin Galactic

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

The idea behind Lockheed Martin and Virgin Galactic Holdings 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.