Correlation Between Textron and Lockheed Martin
Can any of the company-specific risk be diversified away by investing in both Textron 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 Textron and Lockheed Martin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Textron and Lockheed Martin, you can compare the effects of market volatilities on Textron 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 Textron with a short position of Lockheed Martin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Textron and Lockheed Martin.
Diversification Opportunities for Textron and Lockheed Martin
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Textron and Lockheed is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Textron and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin and Textron 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 Textron 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 Textron i.e., Textron and Lockheed Martin go up and down completely randomly.
Pair Corralation between Textron and Lockheed Martin
Assuming the 90 days trading horizon Textron is expected to generate 0.79 times more return on investment than Lockheed Martin. However, Textron is 1.27 times less risky 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 158,723 in Textron on November 2, 2024 and sell it today you would earn a total of 5,667 from holding Textron or generate 3.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.03% |
| Values | Daily Returns |
Textron vs. Lockheed Martin
Performance |
| Timeline |
| Textron |
| Lockheed Martin |
Textron and Lockheed Martin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Textron and Lockheed Martin
The main advantage of trading using opposite Textron and Lockheed Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Textron 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.| Textron vs. The Boeing | Textron vs. Lockheed Martin | Textron vs. General Dynamics | Textron 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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