Correlation Between HSBC Holdings and Lockheed Martin
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings 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 HSBC Holdings and Lockheed Martin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HSBC Holdings plc and Lockheed Martin, you can compare the effects of market volatilities on HSBC Holdings 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 HSBC Holdings with a short position of Lockheed Martin. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and Lockheed Martin.
Diversification Opportunities for HSBC Holdings and Lockheed Martin
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between HSBC and Lockheed is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings plc and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin and HSBC Holdings 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 HSBC Holdings plc 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 HSBC Holdings i.e., HSBC Holdings and Lockheed Martin go up and down completely randomly.
Pair Corralation between HSBC Holdings and Lockheed Martin
Assuming the 90 days trading horizon HSBC Holdings plc is expected to generate 1.16 times more return on investment than Lockheed Martin. However, HSBC Holdings is 1.16 times more volatile than Lockheed Martin. It trades about 0.1 of its potential returns per unit of risk. Lockheed Martin is currently generating about -0.06 per unit of risk. If you would invest 76,171 in HSBC Holdings plc on November 2, 2024 and sell it today you would earn a total of 17,329 from holding HSBC Holdings plc or generate 22.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.03% |
| Values | Daily Returns |
HSBC Holdings plc vs. Lockheed Martin
Performance |
| Timeline |
| HSBC Holdings plc |
| Lockheed Martin |
HSBC Holdings and Lockheed Martin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and Lockheed Martin
The main advantage of trading using opposite HSBC Holdings and Lockheed Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings 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.| HSBC Holdings vs. Capital One Financial | HSBC Holdings vs. Southern Copper | HSBC Holdings vs. Prudential Financial | HSBC Holdings vs. Lloyds Banking Group |
| Lockheed Martin vs. Genworth Financial | Lockheed Martin vs. Grupo Carso SAB | Lockheed Martin vs. Verizon Communications | Lockheed Martin vs. Cognizant Technology Solutions |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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