Correlation Between Lockheed Martin and JAR
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and JAR 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 JAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and JAR, you can compare the effects of market volatilities on Lockheed Martin and JAR 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 JAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and JAR.
Diversification Opportunities for Lockheed Martin and JAR
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lockheed and JAR is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and JAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAR 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 JAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAR has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and JAR go up and down completely randomly.
Pair Corralation between Lockheed Martin and JAR
Considering the 90-day investment horizon Lockheed Martin is expected to under-perform the JAR. In addition to that, Lockheed Martin is 1.51 times more volatile than JAR. It trades about -0.29 of its total potential returns per unit of risk. JAR is currently generating about -0.19 per unit of volatility. If you would invest 0.42 in JAR on November 18, 2024 and sell it today you would lose (0.03) from holding JAR or give up 6.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Lockheed Martin vs. JAR
Performance |
| Timeline |
| Lockheed Martin |
| JAR |
Lockheed Martin and JAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and JAR
The main advantage of trading using opposite Lockheed Martin and JAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, JAR 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 JAR will offset losses from the drop in JAR's long position.| Lockheed Martin vs. Northrop Grumman | Lockheed Martin vs. General Dynamics | Lockheed Martin vs. L3Harris Technologies | Lockheed Martin vs. The Boeing |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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