Correlation Between Lockheed Martin and United States
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
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 Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.31% |
Values | Daily Returns |
Lockheed Martin vs. United States Steel
Performance |
Timeline |
Lockheed Martin |
United States Steel |
Lockheed Martin and United States Volatility Contrast
Predicted Return Density |
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.Lockheed Martin vs. Globus Medical, | ||
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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