Correlation Between Lockheed Martin and CARSALESCOM

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

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

Diversification Opportunities for Lockheed Martin and CARSALESCOM

0.01

Correlation Coefficient

Lockheed Martin  CARSALESCOM

Significant diversification

The 3 months correlation between Lockheed and CARSALESCOM is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM 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 CARSALESCOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and CARSALESCOM go up and down completely randomly.

Pair Corralation between Lockheed Martin and CARSALESCOM

Assuming the 90 days horizon Lockheed Martin is expected to under-perform the CARSALESCOM. In addition to that, Lockheed Martin is 1.03 times more volatile than CARSALESCOM. It trades about -0.19 of its total potential returns per unit of risk. CARSALESCOM is currently generating about 0.03 per unit of volatility. If you would invest  2,320  in CARSALESCOM on October 10, 2024 and sell it today you would earn a total of  40.00  from holding CARSALESCOM or generate 1.72% return on investment over 90 days.

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

Lockheed Martin  vs.  CARSALESCOM

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 fragile 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.

CARSALESCOM

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CARSALESCOM are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, CARSALESCOM is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Lockheed Martin and CARSALESCOM

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

The idea behind Lockheed Martin and CARSALESCOM 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.