Correlation Between Lockheed Martin and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and SPDR SP 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 SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and SPDR SP Global, you can compare the effects of market volatilities on Lockheed Martin and SPDR SP 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 SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and SPDR SP.
Diversification Opportunities for Lockheed Martin and SPDR SP
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Lockheed and SPDR is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and SPDR SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Global 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Global has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and SPDR SP go up and down completely randomly.
Pair Corralation between Lockheed Martin and SPDR SP
Considering the 90-day investment horizon Lockheed Martin is expected to under-perform the SPDR SP. In addition to that, Lockheed Martin is 2.65 times more volatile than SPDR SP Global. It trades about -0.29 of its total potential returns per unit of risk. SPDR SP Global is currently generating about 0.0 per unit of volatility. If you would invest 6,144 in SPDR SP Global on November 18, 2024 and sell it today you would lose (6.00) from holding SPDR SP Global or give up 0.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lockheed Martin vs. SPDR SP Global
Performance |
| Timeline |
| Lockheed Martin |
| SPDR SP Global |
Lockheed Martin and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and SPDR SP
The main advantage of trading using opposite Lockheed Martin and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, SPDR SP 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 SPDR SP will offset losses from the drop in SPDR SP'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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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