Correlation Between Lockheed Martin and SOGECLAIR

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

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

Diversification Opportunities for Lockheed Martin and SOGECLAIR

-0.21

Correlation Coefficient

Lockheed Martin  SOGECLAIR

Very good diversification

The 3 months correlation between Lockheed and SOGECLAIR is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and SOGECLAIR SA INH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOGECLAIR SA INH 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 SOGECLAIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOGECLAIR SA INH has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and SOGECLAIR go up and down completely randomly.

Pair Corralation between Lockheed Martin and SOGECLAIR

Assuming the 90 days horizon Lockheed Martin is expected to under-perform the SOGECLAIR. But the stock apears to be less risky and, when comparing its historical volatility, Lockheed Martin is 1.29 times less risky than SOGECLAIR. The stock trades about -0.08 of its potential returns per unit of risk. The SOGECLAIR SA INH is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,830  in SOGECLAIR SA INH on September 23, 2024 and sell it today you would lose (75.00) from holding SOGECLAIR SA INH or give up 4.1% of portfolio value over 90 days.

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

Lockheed Martin  vs.  SOGECLAIR SA INH

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 fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

SOGECLAIR SA INH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOGECLAIR SA INH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SOGECLAIR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lockheed Martin and SOGECLAIR

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

The idea behind Lockheed Martin and SOGECLAIR SA INH 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.