Correlation Between Lockheed Martin and Adobe Systems
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and Adobe Systems 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 Adobe Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and Adobe Systems Incorporated, you can compare the effects of market volatilities on Lockheed Martin and Adobe Systems 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 Adobe Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and Adobe Systems.
Diversification Opportunities for Lockheed Martin and Adobe Systems
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lockheed and Adobe is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Adobe Systems Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adobe Systems 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 Adobe Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adobe Systems has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Adobe Systems go up and down completely randomly.
Pair Corralation between Lockheed Martin and Adobe Systems
Considering the 90-day investment horizon Lockheed Martin is expected to generate 1.05 times less return on investment than Adobe Systems. But when comparing it to its historical volatility, Lockheed Martin is 1.86 times less risky than Adobe Systems. It trades about 0.06 of its potential returns per unit of risk. Adobe Systems Incorporated is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 43,418 in Adobe Systems Incorporated on August 27, 2024 and sell it today you would earn a total of 7,797 from holding Adobe Systems Incorporated or generate 17.96% 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. Adobe Systems Incorporated
Performance |
| Timeline |
| Lockheed Martin |
| Adobe Systems |
Lockheed Martin and Adobe Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and Adobe Systems
The main advantage of trading using opposite Lockheed Martin and Adobe Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, Adobe Systems 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 Adobe Systems will offset losses from the drop in Adobe Systems' long position.| Lockheed Martin vs. Northrop Grumman | Lockheed Martin vs. General Dynamics | Lockheed Martin vs. L3Harris Technologies | Lockheed Martin vs. The Boeing |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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