Correlation Between Prudential Financial and Lockheed Martin
Can any of the company-specific risk be diversified away by investing in both Prudential Financial 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 Prudential Financial and Lockheed Martin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Financial and Lockheed Martin, you can compare the effects of market volatilities on Prudential Financial 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 Prudential Financial with a short position of Lockheed Martin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and Lockheed Martin.
Diversification Opportunities for Prudential Financial and Lockheed Martin
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Prudential and Lockheed is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin and Prudential Financial 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 Prudential Financial 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 Prudential Financial i.e., Prudential Financial and Lockheed Martin go up and down completely randomly.
Pair Corralation between Prudential Financial and Lockheed Martin
Assuming the 90 days trading horizon Prudential Financial is expected to generate 1.81 times more return on investment than Lockheed Martin. However, Prudential Financial is 1.81 times more volatile than Lockheed Martin. It trades about 0.22 of its potential returns per unit of risk. Lockheed Martin is currently generating about 0.01 per unit of risk. If you would invest 201,500 in Prudential Financial on October 20, 2024 and sell it today you would earn a total of 28,500 from holding Prudential Financial or generate 14.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Prudential Financial vs. Lockheed Martin
Performance |
| Timeline |
| Prudential Financial |
| Lockheed Martin |
Prudential Financial and Lockheed Martin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Financial and Lockheed Martin
The main advantage of trading using opposite Prudential Financial and Lockheed Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Financial 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.| Prudential Financial vs. Grupo Hotelero Santa | Prudential Financial vs. Grupo Sports World | Prudential Financial vs. Genworth Financial | Prudential Financial vs. First Majestic Silver |
| Lockheed Martin vs. McEwen Mining | Lockheed Martin vs. Grupo Sports World | Lockheed Martin vs. Applied Materials | Lockheed Martin vs. UnitedHealth Group Incorporated |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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