Correlation Between Lockheed Martin and Prudential Financial
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and Prudential Financial 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 Prudential Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and Prudential Financial, you can compare the effects of market volatilities on Lockheed Martin and Prudential Financial 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 Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and Prudential Financial.
Diversification Opportunities for Lockheed Martin and Prudential Financial
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lockheed and Prudential is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential 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 Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Prudential Financial go up and down completely randomly.
Pair Corralation between Lockheed Martin and Prudential Financial
Assuming the 90 days trading horizon Lockheed Martin is expected to generate 36.83 times less return on investment than Prudential Financial. But when comparing it to its historical volatility, Lockheed Martin is 1.81 times less risky than Prudential Financial. It trades about 0.01 of its potential returns per unit of risk. Prudential Financial is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 201,500 in Prudential Financial on October 20, 2024 and sell it today you would earn a total of 28,500 from holding Prudential Financial or generate 14.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Lockheed Martin vs. Prudential Financial
Performance |
| Timeline |
| Lockheed Martin |
| Prudential Financial |
Lockheed Martin and Prudential Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and Prudential Financial
The main advantage of trading using opposite Lockheed Martin and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, Prudential Financial 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 Prudential Financial will offset losses from the drop in Prudential Financial's long position.| Lockheed Martin vs. McEwen Mining | Lockheed Martin vs. Grupo Sports World | Lockheed Martin vs. Applied Materials | Lockheed Martin vs. UnitedHealth Group Incorporated |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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