Correlation Between Lockheed Martin and Valero Energy
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and Valero Energy 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 Valero Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and Valero Energy, you can compare the effects of market volatilities on Lockheed Martin and Valero Energy 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 Valero Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and Valero Energy.
Diversification Opportunities for Lockheed Martin and Valero Energy
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lockheed and Valero is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Valero Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valero Energy 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 Valero Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valero Energy has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Valero Energy go up and down completely randomly.
Pair Corralation between Lockheed Martin and Valero Energy
Assuming the 90 days trading horizon Lockheed Martin is expected to generate 1.5 times less return on investment than Valero Energy. But when comparing it to its historical volatility, Lockheed Martin is 1.51 times less risky than Valero Energy. It trades about 0.05 of its potential returns per unit of risk. Valero Energy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 195,768 in Valero Energy on September 14, 2024 and sell it today you would earn a total of 77,901 from holding Valero Energy or generate 39.79% 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. Valero Energy
Performance |
| Timeline |
| Lockheed Martin |
| Valero Energy |
Lockheed Martin and Valero Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and Valero Energy
The main advantage of trading using opposite Lockheed Martin and Valero Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, Valero Energy 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 Valero Energy will offset losses from the drop in Valero Energy's long position.| Lockheed Martin vs. The Boeing | Lockheed Martin vs. General Dynamics | Lockheed Martin vs. Textron | Lockheed Martin vs. Netflix |
| Valero Energy vs. The Walt Disney | Valero Energy vs. The Goodyear Tire | Valero Energy vs. Cognizant Technology Solutions | Valero Energy 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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