Correlation Between Lockheed Martin and Textron

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

Diversification Opportunities for Lockheed Martin and Textron

LockheedTextronDiversified AwayLockheedTextronDiversified Away100%
0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between Lockheed and Textron is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Textron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Textron 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 Textron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Textron has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Textron go up and down completely randomly.

Pair Corralation between Lockheed Martin and Textron

Assuming the 90 days horizon Lockheed Martin is expected to under-perform the Textron. In addition to that, Lockheed Martin is 1.04 times more volatile than Textron. It trades about -0.17 of its total potential returns per unit of risk. Textron is currently generating about -0.07 per unit of volatility. If you would invest  8,224  in Textron on October 20, 2024 and sell it today you would lose (580.00) from holding Textron or give up 7.05% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Lockheed Martin  vs.  Textron

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -15-10-505
JavaScript chart by amCharts 3.21.15LOM TXT
       Timeline  
Lockheed Martin 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Lockheed Martin has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan460480500520540560
Textron 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Textron 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.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan727476788082

Lockheed Martin and Textron Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.79-2.09-1.39-0.690.00.611.221.842.46 0.080.100.120.14
JavaScript chart by amCharts 3.21.15LOM TXT
       Returns  

Pair Trading with Lockheed Martin and Textron

The main advantage of trading using opposite Lockheed Martin and Textron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, Textron 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 Textron will offset losses from the drop in Textron's long position.
The idea behind Lockheed Martin and Textron 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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