Correlation Between Valero Energy and Lockheed Martin
Can any of the company-specific risk be diversified away by investing in both Valero Energy 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 Valero Energy and Lockheed Martin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Valero Energy and Lockheed Martin, you can compare the effects of market volatilities on Valero Energy 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 Valero Energy with a short position of Lockheed Martin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valero Energy and Lockheed Martin.
Diversification Opportunities for Valero Energy and Lockheed Martin
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Valero and Lockheed is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Valero Energy and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin and Valero Energy 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 Valero Energy 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 Valero Energy i.e., Valero Energy and Lockheed Martin go up and down completely randomly.
Pair Corralation between Valero Energy and Lockheed Martin
Assuming the 90 days trading horizon Valero Energy is expected to generate 1.01 times less return on investment than Lockheed Martin. In addition to that, Valero Energy is 1.32 times more volatile than Lockheed Martin. It trades about 0.07 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 737,763 in Lockheed Martin on September 14, 2024 and sell it today you would earn a total of 276,437 from holding Lockheed Martin or generate 37.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Valero Energy vs. Lockheed Martin
Performance |
| Timeline |
| Valero Energy |
| Lockheed Martin |
Valero Energy and Lockheed Martin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Valero Energy and Lockheed Martin
The main advantage of trading using opposite Valero Energy and Lockheed Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valero Energy 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.| Valero Energy vs. The Walt Disney | Valero Energy vs. The Goodyear Tire | Valero Energy vs. Cognizant Technology Solutions | Valero Energy vs. Netflix |
| Lockheed Martin vs. The Boeing | Lockheed Martin vs. General Dynamics | Lockheed Martin vs. Textron | Lockheed Martin vs. Netflix |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
Other Complementary Tools
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities |