Correlation Between Lockheed Martin and Bristol Myers
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and Bristol Myers 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 Bristol Myers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and Bristol Myers Squibb, you can compare the effects of market volatilities on Lockheed Martin and Bristol Myers 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 Bristol Myers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and Bristol Myers.
Diversification Opportunities for Lockheed Martin and Bristol Myers
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lockheed and Bristol is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Bristol Myers Squibb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bristol Myers Squibb 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 Bristol Myers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bristol Myers Squibb has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Bristol Myers go up and down completely randomly.
Pair Corralation between Lockheed Martin and Bristol Myers
Assuming the 90 days trading horizon Lockheed Martin is expected to under-perform the Bristol Myers. But the stock apears to be less risky and, when comparing its historical volatility, Lockheed Martin is 1.14 times less risky than Bristol Myers. The stock trades about -0.06 of its potential returns per unit of risk. The Bristol Myers Squibb is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 98,414 in Bristol Myers Squibb on November 2, 2024 and sell it today you would earn a total of 26,586 from holding Bristol Myers Squibb or generate 27.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.03% |
| Values | Daily Returns |
Lockheed Martin vs. Bristol Myers Squibb
Performance |
| Timeline |
| Lockheed Martin |
| Bristol Myers Squibb |
Lockheed Martin and Bristol Myers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and Bristol Myers
The main advantage of trading using opposite Lockheed Martin and Bristol Myers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, Bristol Myers 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 Bristol Myers will offset losses from the drop in Bristol Myers' long position.| Lockheed Martin vs. Genworth Financial | Lockheed Martin vs. Grupo Carso SAB | Lockheed Martin vs. Verizon Communications | Lockheed Martin vs. Cognizant Technology Solutions |
| Bristol Myers vs. Eli Lilly and | Bristol Myers vs. Merck Company | Bristol Myers vs. Roche Holding AG | Bristol Myers vs. Amgen Inc |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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