Correlation Between Lockheed Martin and Avis Budget
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and Avis Budget 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 Avis Budget into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and Avis Budget Group, you can compare the effects of market volatilities on Lockheed Martin and Avis Budget 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 Avis Budget. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and Avis Budget.
Diversification Opportunities for Lockheed Martin and Avis Budget
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lockheed and Avis is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Avis Budget Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avis Budget Group 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 Avis Budget. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avis Budget Group has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Avis Budget go up and down completely randomly.
Pair Corralation between Lockheed Martin and Avis Budget
Assuming the 90 days trading horizon Lockheed Martin is expected to generate 0.51 times more return on investment than Avis Budget. However, Lockheed Martin is 1.96 times less risky than Avis Budget. It trades about 0.09 of its potential returns per unit of risk. Avis Budget Group is currently generating about -0.03 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. Avis Budget Group
Performance |
| Timeline |
| Lockheed Martin |
| Avis Budget Group |
Lockheed Martin and Avis Budget Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and Avis Budget
The main advantage of trading using opposite Lockheed Martin and Avis Budget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, Avis Budget 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 Avis Budget will offset losses from the drop in Avis Budget's long position.| Lockheed Martin vs. The Boeing | Lockheed Martin vs. General Dynamics | Lockheed Martin vs. Textron | Lockheed Martin vs. Netflix |
| Avis Budget vs. Applied Materials | Avis Budget vs. Grupo Carso SAB | Avis Budget vs. Southwest Airlines | Avis Budget vs. United Airlines Holdings |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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