Correlation Between Lockheed Martin and Frontier Communications
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and Frontier Communications 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 Frontier Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and Frontier Communications Parent, you can compare the effects of market volatilities on Lockheed Martin and Frontier Communications 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 Frontier Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and Frontier Communications.
Diversification Opportunities for Lockheed Martin and Frontier Communications
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Lockheed and Frontier is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Frontier Communications Parent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Communications 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 Frontier Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Communications has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Frontier Communications go up and down completely randomly.
Pair Corralation between Lockheed Martin and Frontier Communications
Considering the 90-day investment horizon Lockheed Martin is expected to generate 2.06 times less return on investment than Frontier Communications. But when comparing it to its historical volatility, Lockheed Martin is 3.23 times less risky than Frontier Communications. It trades about 0.13 of its potential returns per unit of risk. Frontier Communications Parent is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,551 in Frontier Communications Parent on August 24, 2024 and sell it today you would earn a total of 929.00 from holding Frontier Communications Parent or generate 36.42% 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. Frontier Communications Parent
Performance |
| Timeline |
| Lockheed Martin |
| Frontier Communications |
Lockheed Martin and Frontier Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and Frontier Communications
The main advantage of trading using opposite Lockheed Martin and Frontier Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, Frontier Communications 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 Frontier Communications will offset losses from the drop in Frontier Communications' long position.| Lockheed Martin vs. Northrop Grumman | Lockheed Martin vs. General Dynamics | Lockheed Martin vs. L3Harris Technologies | Lockheed Martin vs. The Boeing |
| Frontier Communications vs. Cable One | Frontier Communications vs. Charter Communications | Frontier Communications vs. Liberty Broadband Srs | Frontier Communications vs. ATN International |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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