Correlation Between Lockheed Martin and Huntington Ingalls

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

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

Diversification Opportunities for Lockheed Martin and Huntington Ingalls

0.65

Correlation Coefficient

Lockheed Martin  Huntington Ingalls

Poor diversification

The 3 months correlation between Lockheed and Huntington is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Huntington Ingalls Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huntington Ingalls 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 Huntington Ingalls. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huntington Ingalls has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Huntington Ingalls go up and down completely randomly.

Pair Corralation between Lockheed Martin and Huntington Ingalls

Considering the 90-day investment horizon Lockheed Martin is expected to generate 0.38 times more return on investment than Huntington Ingalls. However, Lockheed Martin is 2.61 times less risky than Huntington Ingalls. It trades about -0.08 of its potential returns per unit of risk. Huntington Ingalls Industries is currently generating about -0.12 per unit of risk. If you would invest  56,722  in Lockheed Martin on August 31, 2024 and sell it today you would lose (4,147) from holding Lockheed Martin or give up 7.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Lockheed Martin  vs.  Huntington Ingalls Industries

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 unsteady performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Huntington Ingalls

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huntington Ingalls Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Lockheed Martin and Huntington Ingalls

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

The idea behind Lockheed Martin and Huntington Ingalls Industries 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.