Correlation Between AAR Corp and Lockheed Martin
Can any of the company-specific risk be diversified away by investing in both AAR Corp and Lockheed Martin 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 AAR Corp and Lockheed Martin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AAR Corp and Lockheed Martin, you can compare the effects of market volatilities on AAR Corp and Lockheed Martin 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 AAR Corp with a short position of Lockheed Martin. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAR Corp and Lockheed Martin.
Diversification Opportunities for AAR Corp and Lockheed Martin
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between AAR and Lockheed is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding AAR Corp and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin and AAR Corp 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 AAR Corp are associated (or correlated) with Lockheed Martin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lockheed Martin has no effect on the direction of AAR Corp i.e., AAR Corp and Lockheed Martin go up and down completely randomly.
Pair Corralation between AAR Corp and Lockheed Martin
Considering the 90-day investment horizon AAR Corp is expected to generate 3.53 times less return on investment than Lockheed Martin. In addition to that, AAR Corp is 2.01 times more volatile than Lockheed Martin. It trades about 0.01 of its total potential returns per unit of risk. Lockheed Martin is currently generating about 0.08 per unit of volatility. If you would invest 43,932 in Lockheed Martin on September 3, 2024 and sell it today you would earn a total of 9,009 from holding Lockheed Martin or generate 20.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AAR Corp vs. Lockheed Martin
Performance |
| Timeline |
| AAR Corp |
| Lockheed Martin |
AAR Corp and Lockheed Martin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AAR Corp and Lockheed Martin
The main advantage of trading using opposite AAR Corp and Lockheed Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAR Corp position performs unexpectedly, Lockheed Martin 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 Lockheed Martin will offset losses from the drop in Lockheed Martin's long position.| AAR Corp vs. Highway Holdings Limited | AAR Corp vs. QCR Holdings | AAR Corp vs. Partner Communications | AAR Corp vs. Acumen Pharmaceuticals |
| Lockheed Martin vs. Northrop Grumman | Lockheed Martin vs. General Dynamics | Lockheed Martin vs. L3Harris Technologies | Lockheed Martin vs. The Boeing |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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