Correlation Between Tesla and Lockheed Martin
Can any of the company-specific risk be diversified away by investing in both Tesla 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 Tesla and Lockheed Martin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and Lockheed Martin, you can compare the effects of market volatilities on Tesla 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 Tesla with a short position of Lockheed Martin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Lockheed Martin.
Diversification Opportunities for Tesla and Lockheed Martin
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Tesla and Lockheed is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin and Tesla 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 Tesla Inc 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 Tesla i.e., Tesla and Lockheed Martin go up and down completely randomly.
Pair Corralation between Tesla and Lockheed Martin
Assuming the 90 days trading horizon Tesla Inc is expected to generate 2.44 times more return on investment than Lockheed Martin. However, Tesla is 2.44 times more volatile than Lockheed Martin. It trades about 0.17 of its potential returns per unit of risk. Lockheed Martin is currently generating about -0.06 per unit of risk. If you would invest 418,560 in Tesla Inc on November 2, 2024 and sell it today you would earn a total of 406,952 from holding Tesla Inc or generate 97.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.03% |
| Values | Daily Returns |
Tesla Inc vs. Lockheed Martin
Performance |
| Timeline |
| Tesla Inc |
| Lockheed Martin |
Tesla and Lockheed Martin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and Lockheed Martin
The main advantage of trading using opposite Tesla and Lockheed Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla 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.| Tesla vs. Southwest Airlines | Tesla vs. Monster Beverage Corp | Tesla vs. Samsung Electronics Co | Tesla vs. KB Home |
| 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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