Correlation Between CVS Health and Lockheed Martin

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

By analyzing existing cross correlation between CVS Health Corp and Lockheed Martin, you can compare the effects of market volatilities on CVS Health 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 CVS Health with a short position of Lockheed Martin. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Lockheed Martin.

Diversification Opportunities for CVS Health and Lockheed Martin

-0.54

Correlation Coefficient

CVS Health  Lockheed Martin

Excellent diversification

The 3 months correlation between CVS and Lockheed is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin and CVS Health 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 CVS Health Corp 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 CVS Health i.e., CVS Health and Lockheed Martin go up and down completely randomly.

Pair Corralation between CVS Health and Lockheed Martin

Considering the 90-day investment horizon CVS Health Corp is expected to under-perform the Lockheed Martin. In addition to that, CVS Health is 3.95 times more volatile than Lockheed Martin. It trades about -0.2 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  43,198  in Lockheed Martin on February 4, 2024 and sell it today you would earn a total of  2,993  from holding Lockheed Martin or generate 6.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.73%
Values	Daily Returns

CVS Health Corp  vs.  Lockheed Martin

CVS Health Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Lockheed Martin

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lockheed Martin are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent primary indicators, Lockheed Martin may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with CVS Health and Lockheed Martin

The main advantage of trading using opposite CVS Health and Lockheed Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health 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 CVS Health Corp 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.