Correlation Between Lockheed Martin and Wayfair
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and Wayfair 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 Wayfair into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and Wayfair, you can compare the effects of market volatilities on Lockheed Martin and Wayfair 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 Wayfair. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and Wayfair.
Diversification Opportunities for Lockheed Martin and Wayfair
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lockheed and Wayfair is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Wayfair in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wayfair 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 Wayfair. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wayfair has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Wayfair go up and down completely randomly.
Pair Corralation between Lockheed Martin and Wayfair
Considering the 90-day investment horizon Lockheed Martin is expected to under-perform the Wayfair. But the stock apears to be less risky and, when comparing its historical volatility, Lockheed Martin is 1.47 times less risky than Wayfair. The stock trades about -0.29 of its potential returns per unit of risk. The Wayfair is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 4,499 in Wayfair on November 18, 2024 and sell it today you would earn a total of 442.00 from holding Wayfair or generate 9.82% 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. Wayfair
Performance |
| Timeline |
| Lockheed Martin |
| Wayfair |
Lockheed Martin and Wayfair Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and Wayfair
The main advantage of trading using opposite Lockheed Martin and Wayfair positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, Wayfair 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 Wayfair will offset losses from the drop in Wayfair'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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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