Correlation Between Lockheed Martin and LRN
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and LRN 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 LRN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and LRN, you can compare the effects of market volatilities on Lockheed Martin and LRN 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 LRN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and LRN.
Diversification Opportunities for Lockheed Martin and LRN
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Lockheed and LRN is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and LRN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LRN 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 LRN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LRN has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and LRN go up and down completely randomly.
Pair Corralation between Lockheed Martin and LRN
Considering the 90-day investment horizon Lockheed Martin is expected to generate 4.24 times less return on investment than LRN. But when comparing it to its historical volatility, Lockheed Martin is 9.54 times less risky than LRN. It trades about 0.03 of its potential returns per unit of risk. LRN is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 0.68 in LRN on August 24, 2024 and sell it today you would lose (0.46) from holding LRN or give up 67.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 60.2% |
| Values | Daily Returns |
Lockheed Martin vs. LRN
Performance |
| Timeline |
| Lockheed Martin |
| LRN |
Lockheed Martin and LRN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and LRN
The main advantage of trading using opposite Lockheed Martin and LRN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, LRN 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 LRN will offset losses from the drop in LRN'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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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