Correlation Between Lockheed Martin and United States

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Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and United States 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 United States into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and United States Steel, you can compare the effects of market volatilities on Lockheed Martin and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and United States.

Diversification Opportunities for Lockheed Martin and United States

LockheedUnitedDiversified AwayLockheedUnitedDiversified Away100%
0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between Lockheed and United is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and United States go up and down completely randomly.

Pair Corralation between Lockheed Martin and United States

Assuming the 90 days trading horizon Lockheed Martin is expected to under-perform the United States. But the stock apears to be less risky and, when comparing its historical volatility, Lockheed Martin is 1.87 times less risky than United States. The stock trades about -0.06 of its potential returns per unit of risk. The United States Steel is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  21,828  in United States Steel on October 26, 2024 and sell it today you would earn a total of  198.00  from holding United States Steel or generate 0.91% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.31%
ValuesDaily Returns

Lockheed Martin  vs.  United States Steel

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -10-5051015
JavaScript chart by amCharts 3.21.15LMTB34 USSX34
       Timeline  
Lockheed Martin 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan2,9003,0003,1003,2003,300
United States Steel 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, United States is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan190200210220230240

Lockheed Martin and United States Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.75-2.08-1.4-0.72-0.04590.591.231.872.513.14 0.060.080.100.120.14
JavaScript chart by amCharts 3.21.15LMTB34 USSX34
       Returns  

Pair Trading with Lockheed Martin and United States

The main advantage of trading using opposite Lockheed Martin and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position.
The idea behind Lockheed Martin and United States Steel 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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