Correlation Between United Parcel and Lockheed Martin
Can any of the company-specific risk be diversified away by investing in both United Parcel and Lockheed Martin 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 United Parcel and Lockheed Martin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Parcel Service and Lockheed Martin, you can compare the effects of market volatilities on United Parcel and Lockheed Martin 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 United Parcel with a short position of Lockheed Martin. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Parcel and Lockheed Martin.
Diversification Opportunities for United Parcel and Lockheed Martin
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between United and Lockheed is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding United Parcel Service and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin and United Parcel 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 United Parcel Service are associated (or correlated) with Lockheed Martin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lockheed Martin has no effect on the direction of United Parcel i.e., United Parcel and Lockheed Martin go up and down completely randomly.
Pair Corralation between United Parcel and Lockheed Martin
Considering the 90-day investment horizon United Parcel Service is expected to under-perform the Lockheed Martin. In addition to that, United Parcel is 2.8 times more volatile than Lockheed Martin. It trades about -0.16 of its total potential returns per unit of risk. Lockheed Martin is currently generating about 0.21 per unit of volatility. If you would invest 44,041 in Lockheed Martin on January 20, 2024 and sell it today you would earn a total of 1,568 from holding Lockheed Martin or generate 3.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
United Parcel Service vs. Lockheed Martin
Performance |
| Timeline |
| United Parcel Service |
| Lockheed Martin |
United Parcel and Lockheed Martin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Parcel and Lockheed Martin
The main advantage of trading using opposite United Parcel and Lockheed Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Parcel position performs unexpectedly, Lockheed Martin 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 Lockheed Martin will offset losses from the drop in Lockheed Martin's long position.The idea behind United Parcel Service and Lockheed Martin 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.| Lockheed Martin vs. Novocure | Lockheed Martin vs. HubSpot | Lockheed Martin vs. DigitalOcean Holdings | Lockheed Martin vs. Appian Corp |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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