Correlation Between Lockheed Martin and Omnicom
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and Omnicom 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 Omnicom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and Omnicom Group, you can compare the effects of market volatilities on Lockheed Martin and Omnicom 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 Omnicom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and Omnicom.
Diversification Opportunities for Lockheed Martin and Omnicom
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lockheed and Omnicom is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Omnicom Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omnicom Group 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 Omnicom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omnicom Group has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Omnicom go up and down completely randomly.
Pair Corralation between Lockheed Martin and Omnicom
Considering the 90-day investment horizon Lockheed Martin is expected to under-perform the Omnicom. But the stock apears to be less risky and, when comparing its historical volatility, Lockheed Martin is 1.73 times less risky than Omnicom. The stock trades about -0.19 of its potential returns per unit of risk. The Omnicom Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 10,072 in Omnicom Group on August 24, 2024 and sell it today you would earn a total of 122.00 from holding Omnicom Group or generate 1.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lockheed Martin vs. Omnicom Group
Performance |
| Timeline |
| Lockheed Martin |
| Omnicom Group |
Lockheed Martin and Omnicom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and Omnicom
The main advantage of trading using opposite Lockheed Martin and Omnicom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, Omnicom 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 Omnicom will offset losses from the drop in Omnicom'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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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