Correlation Between Lockheed Martin and Taurus Armas

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

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

Diversification Opportunities for Lockheed Martin and Taurus Armas

0.5

Correlation Coefficient

Lockheed Martin  Taurus Armas

Very weak diversification

The 3 months correlation between Lockheed and Taurus is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Taurus Armas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taurus Armas SA 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 Taurus Armas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taurus Armas SA has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Taurus Armas go up and down completely randomly.

Pair Corralation between Lockheed Martin and Taurus Armas

Assuming the 90 days trading horizon Lockheed Martin is expected to generate 0.81 times more return on investment than Taurus Armas. However, Lockheed Martin is 1.24 times less risky than Taurus Armas. It trades about -0.14 of its potential returns per unit of risk. Taurus Armas SA is currently generating about -0.13 per unit of risk. If you would invest  326,752  in Lockheed Martin on September 23, 2024 and sell it today you would lose (32,480) from holding Lockheed Martin or give up 9.94% of portfolio value over 90 days.

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

Lockheed Martin  vs.  Taurus Armas SA

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. Despite 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.

Taurus Armas SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taurus Armas SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Lockheed Martin and Taurus Armas

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

The idea behind Lockheed Martin and Taurus Armas SA 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.