Correlation Between Lockheed Martin and Rheinmetall
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and Rheinmetall 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 Rheinmetall into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and Rheinmetall AG, you can compare the effects of market volatilities on Lockheed Martin and Rheinmetall 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 Rheinmetall. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and Rheinmetall.
Diversification Opportunities for Lockheed Martin and Rheinmetall
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lockheed and Rheinmetall is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Rheinmetall AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rheinmetall AG 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 Rheinmetall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rheinmetall AG has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Rheinmetall go up and down completely randomly.
Pair Corralation between Lockheed Martin and Rheinmetall
Considering the 90-day investment horizon Lockheed Martin is expected to generate 4.65 times less return on investment than Rheinmetall. But when comparing it to its historical volatility, Lockheed Martin is 2.5 times less risky than Rheinmetall. It trades about 0.07 of its potential returns per unit of risk. Rheinmetall AG is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 30,192 in Rheinmetall AG on September 3, 2024 and sell it today you would earn a total of 35,708 from holding Rheinmetall AG or generate 118.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.38% |
| Values | Daily Returns |
Lockheed Martin vs. Rheinmetall AG
Performance |
| Timeline |
| Lockheed Martin |
| Rheinmetall AG |
Lockheed Martin and Rheinmetall Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and Rheinmetall
The main advantage of trading using opposite Lockheed Martin and Rheinmetall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, Rheinmetall 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 Rheinmetall will offset losses from the drop in Rheinmetall's long position.| Lockheed Martin vs. Northrop Grumman | Lockheed Martin vs. General Dynamics | Lockheed Martin vs. L3Harris Technologies | Lockheed Martin vs. The Boeing |
| Rheinmetall vs. Lockheed Martin | Rheinmetall vs. BAE Systems PLC | Rheinmetall vs. Qinetiq Group PLC | Rheinmetall vs. Leonardo SpA ADR |
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 Stocks Directory module to find actively traded stocks across global markets.
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