Correlation Between Heico and Lockheed Martin

Can any of the company-specific risk be diversified away by investing in both Heico 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 Heico and Lockheed Martin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Heico and Lockheed Martin, you can compare the effects of market volatilities on Heico 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 Heico with a short position of Lockheed Martin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heico and Lockheed Martin.

Diversification Opportunities for Heico and Lockheed Martin

-0.17

Correlation Coefficient

Heico  Lockheed Martin

Good diversification

The 3 months correlation between Heico and Lockheed is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Heico and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin and Heico 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 Heico 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 Heico i.e., Heico and Lockheed Martin go up and down completely randomly.

Pair Corralation between Heico and Lockheed Martin

Considering the 90-day investment horizon Heico is expected to generate 1.01 times more return on investment than Lockheed Martin. However, Heico is 1.01 times more volatile than Lockheed Martin. It trades about 0.12 of its potential returns per unit of risk. Lockheed Martin is currently generating about -0.07 per unit of risk. If you would invest  24,774  in Heico on September 2, 2024 and sell it today you would earn a total of  2,563  from holding Heico or generate 10.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Heico  vs.  Lockheed Martin

Heico

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heico are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, Heico may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lockheed Martin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lockheed Martin 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Heico and Lockheed Martin

The main advantage of trading using opposite Heico and Lockheed Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heico 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.

The idea behind Heico and Lockheed Martin 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.

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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.