Correlation Between Lockheed Martin and Bayerische Motoren
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and Bayerische Motoren 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 Bayerische Motoren into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and Bayerische Motoren Werke, you can compare the effects of market volatilities on Lockheed Martin and Bayerische Motoren 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 Bayerische Motoren. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and Bayerische Motoren.
Diversification Opportunities for Lockheed Martin and Bayerische Motoren
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lockheed and Bayerische is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Bayerische Motoren Werke in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayerische Motoren Werke 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 Bayerische Motoren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayerische Motoren Werke has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Bayerische Motoren go up and down completely randomly.
Pair Corralation between Lockheed Martin and Bayerische Motoren
Assuming the 90 days trading horizon Lockheed Martin is expected to generate 1.1 times more return on investment than Bayerische Motoren. However, Lockheed Martin is 1.1 times more volatile than Bayerische Motoren Werke. It trades about 0.09 of its potential returns per unit of risk. Bayerische Motoren Werke is currently generating about -0.01 per unit of risk. If you would invest 737,763 in Lockheed Martin on September 14, 2024 and sell it today you would earn a total of 276,437 from holding Lockheed Martin or generate 37.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lockheed Martin vs. Bayerische Motoren Werke
Performance |
| Timeline |
| Lockheed Martin |
| Bayerische Motoren Werke |
Lockheed Martin and Bayerische Motoren Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and Bayerische Motoren
The main advantage of trading using opposite Lockheed Martin and Bayerische Motoren positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, Bayerische Motoren 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 Bayerische Motoren will offset losses from the drop in Bayerische Motoren's long position.| Lockheed Martin vs. The Boeing | Lockheed Martin vs. General Dynamics | Lockheed Martin vs. Textron | Lockheed Martin vs. Netflix |
| Bayerische Motoren vs. Verizon Communications | Bayerische Motoren vs. United Airlines Holdings | Bayerische Motoren vs. First Republic Bank | Bayerische Motoren vs. McEwen Mining |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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