Correlation Between Lockheed Martin and Safran SA

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Can any of the company-specific risk be diversified away by investing in both Lockheed Martin and Safran SA 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 Safran SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and Safran SA, you can compare the effects of market volatilities on Lockheed Martin and Safran SA 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 Safran SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and Safran SA.

Diversification Opportunities for Lockheed Martin and Safran SA

-0.28
  Correlation Coefficient

Very good diversification

The 3 months correlation between Lockheed and Safran is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Safran SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safran SA 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 Safran SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safran SA has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Safran SA go up and down completely randomly.

Pair Corralation between Lockheed Martin and Safran SA

Considering the 90-day investment horizon Lockheed Martin is expected to generate 4.55 times less return on investment than Safran SA. But when comparing it to its historical volatility, Lockheed Martin is 1.35 times less risky than Safran SA. It trades about 0.04 of its potential returns per unit of risk. Safran SA is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  9,795  in Safran SA on December 29, 2023 and sell it today you would earn a total of  12,789  from holding Safran SA or generate 130.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Lockheed Martin  vs.  Safran SA

 Performance 
       Timeline  
Lockheed Martin 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Lockheed Martin are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, Lockheed Martin is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
Safran SA 

Risk-Adjusted Performance

26 of 100

 
Low
 
High
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Safran SA are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Safran SA reported solid returns over the last few months and may actually be approaching a breakup point.

Lockheed Martin and Safran SA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lockheed Martin and Safran SA

The main advantage of trading using opposite Lockheed Martin and Safran SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, Safran SA 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 Safran SA will offset losses from the drop in Safran SA's long position.
The idea behind Lockheed Martin and Safran SA 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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