Correlation Between McKesson and Lockheed Martin
Can any of the company-specific risk be diversified away by investing in both McKesson and Lockheed Martin 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 McKesson and Lockheed Martin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between McKesson and Lockheed Martin, you can compare the effects of market volatilities on McKesson and Lockheed Martin 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 McKesson with a short position of Lockheed Martin. Check out your portfolio center. Please also check ongoing floating volatility patterns of McKesson and Lockheed Martin.
Diversification Opportunities for McKesson and Lockheed Martin
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between McKesson and Lockheed is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding McKesson and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin and McKesson 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 McKesson are associated (or correlated) with Lockheed Martin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lockheed Martin has no effect on the direction of McKesson i.e., McKesson and Lockheed Martin go up and down completely randomly.
Pair Corralation between McKesson and Lockheed Martin
Assuming the 90 days trading horizon McKesson is expected to generate 1.23 times more return on investment than Lockheed Martin. However, McKesson is 1.23 times more volatile than Lockheed Martin. It trades about 0.03 of its potential returns per unit of risk. Lockheed Martin is currently generating about -0.06 per unit of risk. If you would invest 1,145,364 in McKesson on November 2, 2024 and sell it today you would earn a total of 54,204 from holding McKesson or generate 4.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.03% |
| Values | Daily Returns |
McKesson vs. Lockheed Martin
Performance |
| Timeline |
| McKesson |
| Lockheed Martin |
McKesson and Lockheed Martin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with McKesson and Lockheed Martin
The main advantage of trading using opposite McKesson and Lockheed Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McKesson position performs unexpectedly, Lockheed Martin 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 Lockheed Martin will offset losses from the drop in Lockheed Martin's long position.| McKesson vs. Honeywell International | McKesson vs. Fideicomiso Irrevocable No | McKesson vs. Royal Caribbean Group | McKesson vs. The Walt Disney |
| Lockheed Martin vs. Genworth Financial | Lockheed Martin vs. Grupo Carso SAB | Lockheed Martin vs. Verizon Communications | Lockheed Martin vs. Cognizant Technology Solutions |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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