Correlation Between Delta Air and Lockheed Martin
Can any of the company-specific risk be diversified away by investing in both Delta Air 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 Delta Air and Lockheed Martin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Delta Air Lines and Lockheed Martin, you can compare the effects of market volatilities on Delta Air 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 Delta Air with a short position of Lockheed Martin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and Lockheed Martin.
Diversification Opportunities for Delta Air and Lockheed Martin
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Delta and Lockheed is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin and Delta Air 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 Delta Air Lines 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 Delta Air i.e., Delta Air and Lockheed Martin go up and down completely randomly.
Pair Corralation between Delta Air and Lockheed Martin
Assuming the 90 days trading horizon Delta Air Lines is expected to generate 1.49 times more return on investment than Lockheed Martin. However, Delta Air is 1.49 times more volatile than Lockheed Martin. It trades about 0.08 of its potential returns per unit of risk. Lockheed Martin is currently generating about 0.02 per unit of risk. If you would invest 62,344 in Delta Air Lines on September 12, 2024 and sell it today you would earn a total of 66,007 from holding Delta Air Lines or generate 105.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Delta Air Lines vs. Lockheed Martin
Performance |
| Timeline |
| Delta Air Lines |
| Lockheed Martin |
Delta Air and Lockheed Martin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Delta Air and Lockheed Martin
The main advantage of trading using opposite Delta Air and Lockheed Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air 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.| Delta Air vs. Southwest Airlines | Delta Air vs. United Airlines Holdings | Delta Air vs. Controladora Vuela Compaa |
| Lockheed Martin vs. Prudential Financial | Lockheed Martin vs. Delta Air Lines | Lockheed Martin vs. Deutsche Bank Aktiengesellschaft | Lockheed Martin vs. Grupo Sports World |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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