Correlation Between Boeing and Lockheed Martin
Can any of the company-specific risk be diversified away by investing in both Boeing 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 Boeing and Lockheed Martin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Boeing and Lockheed Martin, you can compare the effects of market volatilities on Boeing 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 Boeing with a short position of Lockheed Martin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boeing and Lockheed Martin.
Diversification Opportunities for Boeing and Lockheed Martin
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Boeing and Lockheed is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin and Boeing 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 The Boeing 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 Boeing i.e., Boeing and Lockheed Martin go up and down completely randomly.
Pair Corralation between Boeing and Lockheed Martin
Allowing for the 90-day total investment horizon The Boeing is expected to generate 1.04 times more return on investment than Lockheed Martin. However, Boeing is 1.04 times more volatile than Lockheed Martin. It trades about 0.14 of its potential returns per unit of risk. Lockheed Martin is currently generating about -0.14 per unit of risk. If you would invest 15,507 in The Boeing on November 2, 2024 and sell it today you would earn a total of 2,446 from holding The Boeing or generate 15.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Boeing vs. Lockheed Martin
Performance |
| Timeline |
| Boeing |
| Lockheed Martin |
Boeing and Lockheed Martin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boeing and Lockheed Martin
The main advantage of trading using opposite Boeing and Lockheed Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing 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.| Boeing vs. General Dynamics | Boeing vs. Rocket Lab USA | Boeing vs. SCOR PK | Boeing vs. Aquagold International |
| 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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