Correlation Between Lockheed Martin and Constellation Energy

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Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and Constellation 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 Constellation 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 Constellation Energy Corp, you can compare the effects of market volatilities on Lockheed Martin and Constellation 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 Constellation Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and Constellation Energy.

Diversification Opportunities for Lockheed Martin and Constellation Energy

-0.56
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Lockheed and Constellation is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Constellation Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Energy Corp 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 Constellation Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellation Energy Corp has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Constellation Energy go up and down completely randomly.

Pair Corralation between Lockheed Martin and Constellation Energy

Considering the 90-day investment horizon Lockheed Martin is expected to under-perform the Constellation Energy. But the stock apears to be less risky and, when comparing its historical volatility, Lockheed Martin is 2.27 times less risky than Constellation Energy. The stock trades about -0.29 of its potential returns per unit of risk. The Constellation Energy Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  31,636  in Constellation Energy Corp on November 18, 2024 and sell it today you would earn a total of  94.00  from holding Constellation Energy Corp or generate 0.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Lockheed Martin  vs.  Constellation Energy Corp

 Performance 
       Timeline  
Lockheed Martin 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Lockheed Martin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
Constellation Energy Corp 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Energy Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Constellation Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Lockheed Martin and Constellation Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lockheed Martin and Constellation Energy

The main advantage of trading using opposite Lockheed Martin and Constellation Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, Constellation 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 Constellation Energy will offset losses from the drop in Constellation Energy's long position.
The idea behind Lockheed Martin and Constellation Energy Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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