Correlation Between Lockheed Martin and Boeing
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and Boeing 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 Boeing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and The Boeing, you can compare the effects of market volatilities on Lockheed Martin and Boeing 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 Boeing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and Boeing.
Diversification Opportunities for Lockheed Martin and Boeing
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lockheed and Boeing is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing 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 Boeing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boeing has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Boeing go up and down completely randomly.
Pair Corralation between Lockheed Martin and Boeing
Assuming the 90 days trading horizon Lockheed Martin is expected to under-perform the Boeing. But the stock apears to be less risky and, when comparing its historical volatility, Lockheed Martin is 2.06 times less risky than Boeing. The stock trades about -0.29 of its potential returns per unit of risk. The The Boeing is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest 14,510 in The Boeing on September 25, 2024 and sell it today you would earn a total of 2,646 from holding The Boeing or generate 18.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lockheed Martin vs. The Boeing
Performance |
| Timeline |
| Lockheed Martin |
| Boeing |
Lockheed Martin and Boeing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and Boeing
The main advantage of trading using opposite Lockheed Martin and Boeing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, Boeing 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 Boeing will offset losses from the drop in Boeing's long position.| Lockheed Martin vs. Raytheon Technologies Corp | Lockheed Martin vs. The Boeing | Lockheed Martin vs. Lockheed Martin | Lockheed Martin vs. The Boeing |
| Boeing vs. Raytheon Technologies Corp | Boeing vs. Lockheed Martin | Boeing vs. The Boeing | Boeing vs. Lockheed Martin |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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