Correlation Between Lockheed Martin and Hess

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

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

Diversification Opportunities for Lockheed Martin and Hess

-0.33

Correlation Coefficient

Lockheed Martin  Hess

Very good diversification

The 3 months correlation between Lockheed and Hess is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Hess Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hess 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 Hess. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hess has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Hess go up and down completely randomly.

Pair Corralation between Lockheed Martin and Hess

Assuming the 90 days trading horizon Lockheed Martin is expected to under-perform the Hess. In addition to that, Lockheed Martin is 44.3 times more volatile than Hess Corporation. It trades about -0.1 of its total potential returns per unit of risk. Hess Corporation is currently generating about 0.13 per unit of volatility. If you would invest  37,818  in Hess Corporation on October 22, 2024 and sell it today you would earn a total of  106.00  from holding Hess Corporation or generate 0.28% return on investment over 90 days.

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

Lockheed Martin  vs.  Hess Corp.

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. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Hess

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hess Corporation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Hess is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lockheed Martin and Hess

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

The idea behind Lockheed Martin and Hess Corporation 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.