Correlation Between Lockheed Martin and IMCD NV
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and IMCD NV 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 IMCD NV into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and IMCD NV, you can compare the effects of market volatilities on Lockheed Martin and IMCD NV 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 IMCD NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and IMCD NV.
Diversification Opportunities for Lockheed Martin and IMCD NV
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lockheed and IMCD is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and IMCD NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMCD NV 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 IMCD NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMCD NV has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and IMCD NV go up and down completely randomly.
Pair Corralation between Lockheed Martin and IMCD NV
Considering the 90-day investment horizon Lockheed Martin is expected to generate 0.6 times more return on investment than IMCD NV. However, Lockheed Martin is 1.68 times less risky than IMCD NV. It trades about -0.19 of its potential returns per unit of risk. IMCD NV is currently generating about -0.16 per unit of risk. If you would invest 57,110 in Lockheed Martin on August 24, 2024 and sell it today you would lose (2,909) from holding Lockheed Martin or give up 5.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lockheed Martin vs. IMCD NV
Performance |
| Timeline |
| Lockheed Martin |
| IMCD NV |
Lockheed Martin and IMCD NV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and IMCD NV
The main advantage of trading using opposite Lockheed Martin and IMCD NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, IMCD NV 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 IMCD NV will offset losses from the drop in IMCD NV's long position.| Lockheed Martin vs. Northrop Grumman | Lockheed Martin vs. General Dynamics | Lockheed Martin vs. L3Harris Technologies | Lockheed Martin vs. The Boeing |
| IMCD NV vs. Wolters Kluwer NV | IMCD NV vs. Aalberts Industries NV | IMCD NV vs. ASM International NV | IMCD NV vs. ASR Nederland NV |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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