Correlation Between Lockheed Martin and Kadant
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and Kadant 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 Kadant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and Kadant Inc, you can compare the effects of market volatilities on Lockheed Martin and Kadant 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 Kadant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and Kadant.
Diversification Opportunities for Lockheed Martin and Kadant
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lockheed and Kadant is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Kadant Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kadant Inc 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 Kadant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kadant Inc has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Kadant go up and down completely randomly.
Pair Corralation between Lockheed Martin and Kadant
Considering the 90-day investment horizon Lockheed Martin is expected to generate 4.82 times less return on investment than Kadant. But when comparing it to its historical volatility, Lockheed Martin is 1.77 times less risky than Kadant. It trades about 0.03 of its potential returns per unit of risk. Kadant Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 18,454 in Kadant Inc on August 27, 2024 and sell it today you would earn a total of 23,447 from holding Kadant Inc or generate 127.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lockheed Martin vs. Kadant Inc
Performance |
| Timeline |
| Lockheed Martin |
| Kadant Inc |
Lockheed Martin and Kadant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and Kadant
The main advantage of trading using opposite Lockheed Martin and Kadant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, Kadant 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 Kadant will offset losses from the drop in Kadant'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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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