Correlation Between Lockheed Martin and LGI Homes
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and LGI Homes 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 LGI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and LGI Homes, you can compare the effects of market volatilities on Lockheed Martin and LGI Homes 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 LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and LGI Homes.
Diversification Opportunities for Lockheed Martin and LGI Homes
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Lockheed and LGI is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes 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 LGI Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LGI Homes has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and LGI Homes go up and down completely randomly.
Pair Corralation between Lockheed Martin and LGI Homes
Considering the 90-day investment horizon Lockheed Martin is expected to generate 0.28 times more return on investment than LGI Homes. However, Lockheed Martin is 3.62 times less risky than LGI Homes. It trades about 0.16 of its potential returns per unit of risk. LGI Homes is currently generating about -0.11 per unit of risk. If you would invest 42,678 in Lockheed Martin on January 26, 2024 and sell it today you would earn a total of 3,236 from holding Lockheed Martin or generate 7.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lockheed Martin vs. LGI Homes
Performance |
| Timeline |
| Lockheed Martin |
| LGI Homes |
Lockheed Martin and LGI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and LGI Homes
The main advantage of trading using opposite Lockheed Martin and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, LGI Homes 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 LGI Homes will offset losses from the drop in LGI Homes' long position.| Lockheed Martin vs. Novocure | Lockheed Martin vs. HubSpot | Lockheed Martin vs. DigitalOcean Holdings | Lockheed Martin vs. Appian Corp |
| LGI Homes vs. Api GroupCorp | LGI Homes vs. MYR Group | LGI Homes vs. Comfort Systems USA | LGI Homes vs. Construction Partners |
Check out your portfolio center.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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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