Correlation Between Lockheed Martin and Airbus SE

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

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

Diversification Opportunities for Lockheed Martin and Airbus SE

-0.76

Correlation Coefficient

Lockheed Martin  Airbus SE

Pay attention - limited upside

The 3 months correlation between Lockheed and Airbus is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Airbus SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbus SE 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 Airbus SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbus SE has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Airbus SE go up and down completely randomly.

Pair Corralation between Lockheed Martin and Airbus SE

Assuming the 90 days horizon Lockheed Martin is expected to under-perform the Airbus SE. But the stock apears to be less risky and, when comparing its historical volatility, Lockheed Martin is 1.45 times less risky than Airbus SE. The stock trades about -0.36 of its potential returns per unit of risk. The Airbus SE is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  3,440  in Airbus SE on September 23, 2024 and sell it today you would earn a total of  400.00  from holding Airbus SE or generate 11.63% return on investment over 90 days.

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

Lockheed Martin  vs.  Airbus SE

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 fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Airbus SE

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Airbus SE are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Airbus SE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lockheed Martin and Airbus SE

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

The idea behind Lockheed Martin and Airbus SE 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.