Correlation Between Lockheed Martin and KeyCorp
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and KeyCorp 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 KeyCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and KeyCorp, you can compare the effects of market volatilities on Lockheed Martin and KeyCorp 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 KeyCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and KeyCorp.
Diversification Opportunities for Lockheed Martin and KeyCorp
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Lockheed and KeyCorp is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp 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 KeyCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KeyCorp has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and KeyCorp go up and down completely randomly.
Pair Corralation between Lockheed Martin and KeyCorp
Considering the 90-day investment horizon Lockheed Martin is expected to generate 1.39 times more return on investment than KeyCorp. However, Lockheed Martin is 1.39 times more volatile than KeyCorp. It trades about 0.13 of its potential returns per unit of risk. KeyCorp is currently generating about 0.08 per unit of risk. If you would invest 45,288 in Lockheed Martin on August 24, 2024 and sell it today you would earn a total of 8,913 from holding Lockheed Martin or generate 19.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lockheed Martin vs. KeyCorp
Performance |
| Timeline |
| Lockheed Martin |
| KeyCorp |
Lockheed Martin and KeyCorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and KeyCorp
The main advantage of trading using opposite Lockheed Martin and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, KeyCorp 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 KeyCorp will offset losses from the drop in KeyCorp'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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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