Correlation Between Lockheed Martin and Chipotle Mexican
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and Chipotle Mexican 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 Chipotle Mexican into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and Chipotle Mexican Grill, you can compare the effects of market volatilities on Lockheed Martin and Chipotle Mexican 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 Chipotle Mexican. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and Chipotle Mexican.
Diversification Opportunities for Lockheed Martin and Chipotle Mexican
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lockheed and Chipotle is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Chipotle Mexican Grill in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chipotle Mexican Grill 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 Chipotle Mexican. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chipotle Mexican Grill has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Chipotle Mexican go up and down completely randomly.
Pair Corralation between Lockheed Martin and Chipotle Mexican
Assuming the 90 days trading horizon Lockheed Martin is expected to generate 0.23 times more return on investment than Chipotle Mexican. However, Lockheed Martin is 4.41 times less risky than Chipotle Mexican. It trades about 0.09 of its potential returns per unit of risk. Chipotle Mexican Grill is currently generating about -0.02 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lockheed Martin vs. Chipotle Mexican Grill
Performance |
| Timeline |
| Lockheed Martin |
| Chipotle Mexican Grill |
Lockheed Martin and Chipotle Mexican Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and Chipotle Mexican
The main advantage of trading using opposite Lockheed Martin and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, Chipotle Mexican 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 Chipotle Mexican will offset losses from the drop in Chipotle Mexican's long position.| Lockheed Martin vs. The Boeing | Lockheed Martin vs. General Dynamics | Lockheed Martin vs. Textron | Lockheed Martin vs. Netflix |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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