Correlation Between Lockheed Martin and Electro Optic
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and Electro Optic 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 Electro Optic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and Electro Optic Systems, you can compare the effects of market volatilities on Lockheed Martin and Electro Optic 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 Electro Optic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and Electro Optic.
Diversification Opportunities for Lockheed Martin and Electro Optic
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lockheed and Electro is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Electro Optic Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electro Optic 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 Electro Optic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electro Optic Systems has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Electro Optic go up and down completely randomly.
Pair Corralation between Lockheed Martin and Electro Optic
Considering the 90-day investment horizon Lockheed Martin is expected to generate 9.07 times less return on investment than Electro Optic. But when comparing it to its historical volatility, Lockheed Martin is 4.25 times less risky than Electro Optic. It trades about 0.03 of its potential returns per unit of risk. Electro Optic Systems is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 32.00 in Electro Optic Systems on September 2, 2024 and sell it today you would earn a total of 53.00 from holding Electro Optic Systems or generate 165.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lockheed Martin vs. Electro Optic Systems
Performance |
| Timeline |
| Lockheed Martin |
| Electro Optic Systems |
Lockheed Martin and Electro Optic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and Electro Optic
The main advantage of trading using opposite Lockheed Martin and Electro Optic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, Electro Optic 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 Electro Optic will offset losses from the drop in Electro Optic's long position.| Lockheed Martin vs. Northrop Grumman | Lockheed Martin vs. General Dynamics | Lockheed Martin vs. L3Harris Technologies | Lockheed Martin vs. The Boeing |
| Electro Optic vs. Firan Technology Group | Electro Optic vs. 808 Renewable Energy | Electro Optic vs. Park Electrochemical | Electro Optic vs. Innovative Solutions and |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
Other Complementary Tools
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope |