Correlation Between Lockheed Martin and Boeing

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Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and Boeing 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 Lockheed Martin and Boeing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin Corp and Boeing Company, you can compare the effects of market volatilities on Lockheed Martin and Boeing 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 Lockheed Martin with a short position of Boeing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and Boeing.

Diversification Opportunities for Lockheed Martin and Boeing

-0.36
  Correlation Coefficient

Very good diversification

The 3 months correlation between Lockheed and Boeing is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin Corp and Boeing Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing Company and Lockheed Martin 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 Lockheed Martin Corp are associated (or correlated) with Boeing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boeing Company has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Boeing go up and down completely randomly.

Pair Corralation between Lockheed Martin and Boeing

Considering the 90-day investment horizon Lockheed Martin is expected to generate 3.41 times less return on investment than Boeing. But when comparing it to its historical volatility, Lockheed Martin Corp is 1.6 times less risky than Boeing. It trades about 0.12 of its potential returns per unit of risk. Boeing Company is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  13,336  in Boeing Company on May 17, 2022 and sell it today you would earn a total of  3,663  from holding Boeing Company or generate 27.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Lockheed Martin Corp  vs.  Boeing Company

 Performance (%) 
       Timeline  
Lockheed Martin Corp 
Lockheed Performance
0 of 100
Over the last 90 days Lockheed Martin Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Lockheed Martin is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Lockheed Price Channel

Boeing Company 
Boeing Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Boeing Company are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Boeing sustained solid returns over the last few months and may actually be approaching a breakup point.

Boeing Price Channel

Lockheed Martin and Boeing Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lockheed Martin and Boeing

The main advantage of trading using opposite Lockheed Martin and Boeing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, Boeing 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 Boeing will offset losses from the drop in Boeing's long position.
The idea behind Lockheed Martin Corp and Boeing Company pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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