Correlation Between Safran SA and Lockheed Martin
Can any of the company-specific risk be diversified away by investing in both Safran SA 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 Safran SA and Lockheed Martin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Safran SA and Lockheed Martin, you can compare the effects of market volatilities on Safran SA 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 Safran SA with a short position of Lockheed Martin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Safran SA and Lockheed Martin.
Diversification Opportunities for Safran SA and Lockheed Martin
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Safran and Lockheed is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Safran SA and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin and Safran SA 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 Safran SA 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 Safran SA i.e., Safran SA and Lockheed Martin go up and down completely randomly.
Pair Corralation between Safran SA and Lockheed Martin
Assuming the 90 days horizon Safran SA is expected to generate 5.6 times less return on investment than Lockheed Martin. In addition to that, Safran SA is 1.21 times more volatile than Lockheed Martin. It trades about 0.01 of its total potential returns per unit of risk. Lockheed Martin is currently generating about 0.09 per unit of volatility. If you would invest 46,265 in Lockheed Martin on September 3, 2024 and sell it today you would earn a total of 6,676 from holding Lockheed Martin or generate 14.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Safran SA vs. Lockheed Martin
Performance |
| Timeline |
| Safran SA |
| Lockheed Martin |
Safran SA and Lockheed Martin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Safran SA and Lockheed Martin
The main advantage of trading using opposite Safran SA and Lockheed Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safran SA 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.| Safran SA vs. Airbus Group NV | Safran SA vs. Moog Inc | Safran SA vs. BAE Systems PLC | Safran SA vs. Airbus Group SE |
| 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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