Correlation Between LOCKHEED and Transocean

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

By analyzing existing cross correlation between LOCKHEED MARTIN P and Transocean, you can compare the effects of market volatilities on LOCKHEED and Transocean 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 with a short position of Transocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of LOCKHEED and Transocean.

Diversification Opportunities for LOCKHEED and Transocean

-0.09

Correlation Coefficient

LOCKHEED  Transocean

Good diversification

The 3 months correlation between LOCKHEED and Transocean is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding LOCKHEED MARTIN P and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean and LOCKHEED 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 P are associated (or correlated) with Transocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transocean has no effect on the direction of LOCKHEED i.e., LOCKHEED and Transocean go up and down completely randomly.

Pair Corralation between LOCKHEED and Transocean

Assuming the 90 days trading horizon LOCKHEED MARTIN P is expected to under-perform the Transocean. But the bond apears to be less risky and, when comparing its historical volatility, LOCKHEED MARTIN P is 2.52 times less risky than Transocean. The bond trades about -0.18 of its potential returns per unit of risk. The Transocean is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  444.00  in Transocean on September 15, 2024 and sell it today you would lose (58.00) from holding Transocean or give up 13.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	65.63%
Values	Daily Returns

LOCKHEED MARTIN P  vs.  Transocean

LOCKHEED MARTIN P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LOCKHEED MARTIN P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for LOCKHEED MARTIN P investors.

Transocean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transocean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with LOCKHEED and Transocean

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

The idea behind LOCKHEED MARTIN P and Transocean 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.