Correlation Between Lockheed Martin and Raytheon Technologies
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and Raytheon Technologies 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 Raytheon Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and Raytheon Technologies Corp, you can compare the effects of market volatilities on Lockheed Martin and Raytheon Technologies 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 Raytheon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and Raytheon Technologies.
Diversification Opportunities for Lockheed Martin and Raytheon Technologies
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lockheed and Raytheon is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Raytheon Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies 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 Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Raytheon Technologies go up and down completely randomly.
Pair Corralation between Lockheed Martin and Raytheon Technologies
Considering the 90-day investment horizon Lockheed Martin is expected to under-perform the Raytheon Technologies. In addition to that, Lockheed Martin is 1.4 times more volatile than Raytheon Technologies Corp. It trades about -0.29 of its total potential returns per unit of risk. Raytheon Technologies Corp is currently generating about 0.04 per unit of volatility. If you would invest 12,111 in Raytheon Technologies Corp on November 18, 2024 and sell it today you would earn a total of 130.00 from holding Raytheon Technologies Corp or generate 1.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lockheed Martin vs. Raytheon Technologies Corp
Performance |
| Timeline |
| Lockheed Martin |
| Raytheon Technologies |
Lockheed Martin and Raytheon Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and Raytheon Technologies
The main advantage of trading using opposite Lockheed Martin and Raytheon Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, Raytheon Technologies 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 Raytheon Technologies will offset losses from the drop in Raytheon Technologies' long position.| Lockheed Martin vs. Northrop Grumman | Lockheed Martin vs. General Dynamics | Lockheed Martin vs. L3Harris Technologies | Lockheed Martin vs. The Boeing |
| Raytheon Technologies vs. Northrop Grumman | Raytheon Technologies vs. General Dynamics | Raytheon Technologies vs. The Boeing | Raytheon Technologies vs. L3Harris Technologies |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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