Correlation Between Lockheed Martin and Heico

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

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

Diversification Opportunities for Lockheed Martin and Heico

-0.17

Correlation Coefficient

Lockheed Martin  Heico

Good diversification

The 3 months correlation between Lockheed and Heico is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Heico in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heico 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 Heico. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heico has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Heico go up and down completely randomly.

Pair Corralation between Lockheed Martin and Heico

Considering the 90-day investment horizon Lockheed Martin is expected to under-perform the Heico. But the stock apears to be less risky and, when comparing its historical volatility, Lockheed Martin is 1.22 times less risky than Heico. The stock trades about -0.09 of its potential returns per unit of risk. The Heico is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  24,586  in Heico on September 2, 2024 and sell it today you would earn a total of  2,751  from holding Heico or generate 11.19% return on investment over 90 days.

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

Lockheed Martin  vs.  Heico

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.

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.

Pair Trading with Lockheed Martin and Heico

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

The idea behind Lockheed Martin and Heico 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.