Correlation Between Lockheed Martin and Safran SA
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and Safran SA 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 Safran SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and Safran SA, you can compare the effects of market volatilities on Lockheed Martin and Safran SA 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 Safran SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and Safran SA.
Diversification Opportunities for Lockheed Martin and Safran SA
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lockheed and Safran is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Safran SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safran SA 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 Safran SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safran SA has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Safran SA go up and down completely randomly.
Pair Corralation between Lockheed Martin and Safran SA
Considering the 90-day investment horizon Lockheed Martin is expected to generate 1.53 times less return on investment than Safran SA. But when comparing it to its historical volatility, Lockheed Martin is 1.26 times less risky than Safran SA. It trades about 0.08 of its potential returns per unit of risk. Safran SA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4,389 in Safran SA on September 3, 2024 and sell it today you would earn a total of 1,440 from holding Safran SA or generate 32.81% 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. Safran SA
Performance |
| Timeline |
| Lockheed Martin |
| Safran SA |
Lockheed Martin and Safran SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and Safran SA
The main advantage of trading using opposite Lockheed Martin and Safran SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, Safran SA 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 Safran SA will offset losses from the drop in Safran SA's long position.| Lockheed Martin vs. Northrop Grumman | Lockheed Martin vs. General Dynamics | Lockheed Martin vs. L3Harris Technologies | Lockheed Martin vs. The Boeing |
| Safran SA vs. Airbus Group NV | Safran SA vs. Moog Inc | Safran SA vs. BAE Systems PLC | Safran SA vs. Airbus Group SE |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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