Correlation Between Lockheed Martin and Capital One
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and Capital One 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 Capital One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and Capital One Financial, you can compare the effects of market volatilities on Lockheed Martin and Capital One 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 Capital One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and Capital One.
Diversification Opportunities for Lockheed Martin and Capital One
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lockheed and Capital is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One Financial 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 Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Capital One go up and down completely randomly.
Pair Corralation between Lockheed Martin and Capital One
Assuming the 90 days trading horizon Lockheed Martin is expected to generate 12.8 times less return on investment than Capital One. But when comparing it to its historical volatility, Lockheed Martin is 1.6 times less risky than Capital One. It trades about 0.03 of its potential returns per unit of risk. Capital One Financial is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 267,115 in Capital One Financial on August 31, 2024 and sell it today you would earn a total of 115,871 from holding Capital One Financial or generate 43.38% 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. Capital One Financial
Performance |
| Timeline |
| Lockheed Martin |
| Capital One Financial |
Lockheed Martin and Capital One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and Capital One
The main advantage of trading using opposite Lockheed Martin and Capital One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, Capital One 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 Capital One will offset losses from the drop in Capital One's long position.| Lockheed Martin vs. GMxico Transportes SAB | Lockheed Martin vs. Ross Stores | Lockheed Martin vs. New Oriental Education | Lockheed Martin vs. Cognizant Technology Solutions |
| Capital One vs. Applied Materials | Capital One vs. FibraHotel | Capital One vs. Grupo Carso SAB | Capital One vs. Verizon Communications |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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