Correlation Between Lockheed Martin and Nutrien
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and Nutrien 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 Nutrien into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and Nutrien, you can compare the effects of market volatilities on Lockheed Martin and Nutrien 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 Nutrien. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and Nutrien.
Diversification Opportunities for Lockheed Martin and Nutrien
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Lockheed and Nutrien is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Nutrien in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nutrien 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 Nutrien. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nutrien has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Nutrien go up and down completely randomly.
Pair Corralation between Lockheed Martin and Nutrien
Considering the 90-day investment horizon Lockheed Martin is expected to generate 0.59 times more return on investment than Nutrien. However, Lockheed Martin is 1.7 times less risky than Nutrien. It trades about 0.03 of its potential returns per unit of risk. Nutrien is currently generating about -0.04 per unit of risk. If you would invest 46,845 in Lockheed Martin on August 24, 2024 and sell it today you would earn a total of 7,356 from holding Lockheed Martin or generate 15.7% 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. Nutrien
Performance |
| Timeline |
| Lockheed Martin |
| Nutrien |
Lockheed Martin and Nutrien Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and Nutrien
The main advantage of trading using opposite Lockheed Martin and Nutrien positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, Nutrien 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 Nutrien will offset losses from the drop in Nutrien's long position.| Lockheed Martin vs. Northrop Grumman | Lockheed Martin vs. General Dynamics | Lockheed Martin vs. L3Harris Technologies | Lockheed Martin vs. The Boeing |
| Nutrien vs. CF Industries Holdings | Nutrien vs. Intrepid Potash | Nutrien vs. Corteva | Nutrien vs. ICL Israel Chemicals |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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