Correlation Between Lockheed Martin and IShares Energy
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and IShares Energy 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 IShares Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and iShares Energy ETF, you can compare the effects of market volatilities on Lockheed Martin and IShares Energy 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 IShares Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and IShares Energy.
Diversification Opportunities for Lockheed Martin and IShares Energy
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lockheed and IShares is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and iShares Energy ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Energy ETF 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 IShares Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Energy ETF has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and IShares Energy go up and down completely randomly.
Pair Corralation between Lockheed Martin and IShares Energy
Considering the 90-day investment horizon Lockheed Martin is expected to generate 1.05 times more return on investment than IShares Energy. However, Lockheed Martin is 1.05 times more volatile than iShares Energy ETF. It trades about 0.11 of its potential returns per unit of risk. iShares Energy ETF is currently generating about 0.06 per unit of risk. If you would invest 44,719 in Lockheed Martin on August 27, 2024 and sell it today you would earn a total of 7,470 from holding Lockheed Martin or generate 16.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lockheed Martin vs. iShares Energy ETF
Performance |
| Timeline |
| Lockheed Martin |
| iShares Energy ETF |
Lockheed Martin and IShares Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and IShares Energy
The main advantage of trading using opposite Lockheed Martin and IShares Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, IShares Energy 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 IShares Energy will offset losses from the drop in IShares Energy's long position.| Lockheed Martin vs. Northrop Grumman | Lockheed Martin vs. General Dynamics | Lockheed Martin vs. L3Harris Technologies | Lockheed Martin vs. The Boeing |
| IShares Energy vs. iShares Basic Materials | IShares Energy vs. iShares Utilities ETF | IShares Energy vs. iShares Financials ETF | IShares Energy vs. iShares Healthcare ETF |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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