Correlation Between Lockheed Martin and Five Point
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and Five Point 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 Five Point into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and Five Point Holdings, you can compare the effects of market volatilities on Lockheed Martin and Five Point 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 Five Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and Five Point.
Diversification Opportunities for Lockheed Martin and Five Point
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Lockheed and Five is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Five Point Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Point Holdings 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 Five Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Point Holdings has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Five Point go up and down completely randomly.
Pair Corralation between Lockheed Martin and Five Point
Considering the 90-day investment horizon Lockheed Martin is expected to under-perform the Five Point. But the stock apears to be less risky and, when comparing its historical volatility, Lockheed Martin is 1.99 times less risky than Five Point. The stock trades about -0.19 of its potential returns per unit of risk. The Five Point Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 390.00 in Five Point Holdings on August 24, 2024 and sell it today you would earn a total of 6.00 from holding Five Point Holdings or generate 1.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lockheed Martin vs. Five Point Holdings
Performance |
| Timeline |
| Lockheed Martin |
| Five Point Holdings |
Lockheed Martin and Five Point Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and Five Point
The main advantage of trading using opposite Lockheed Martin and Five Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, Five Point 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 Five Point will offset losses from the drop in Five Point's 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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