Correlation Between Lockheed Martin and NOV

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

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

Diversification Opportunities for Lockheed Martin and NOV

-0.73

Correlation Coefficient

Lockheed Martin  NOV

Pay attention - limited upside

The 3 months correlation between Lockheed and NOV is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and NOV Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOV Inc 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 are associated (or correlated) with NOV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOV Inc has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and NOV go up and down completely randomly.

Pair Corralation between Lockheed Martin and NOV

Assuming the 90 days trading horizon Lockheed Martin is expected to generate 0.83 times more return on investment than NOV. However, Lockheed Martin is 1.21 times less risky than NOV. It trades about 0.03 of its potential returns per unit of risk. NOV Inc is currently generating about 0.0 per unit of risk. If you would invest  883,950  in Lockheed Martin on September 24, 2024 and sell it today you would earn a total of  130,250  from holding Lockheed Martin or generate 14.73% return on investment over 90 days.

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

Lockheed Martin  vs.  NOV Inc

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

NOV Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NOV Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, NOV is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lockheed Martin and NOV

The main advantage of trading using opposite Lockheed Martin and NOV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, NOV 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 NOV will offset losses from the drop in NOV's long position.

The idea behind Lockheed Martin and NOV Inc 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.