Correlation Between CPI Aerostructures and Lockheed Martin

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

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

Diversification Opportunities for CPI Aerostructures and Lockheed Martin

-0.3

Correlation Coefficient

CPI Aerostructures  Lockheed Martin

Very good diversification

The 3 months correlation between CPI and Lockheed is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding CPI Aerostructures and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin and CPI Aerostructures 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 CPI Aerostructures 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 CPI Aerostructures i.e., CPI Aerostructures and Lockheed Martin go up and down completely randomly.

Pair Corralation between CPI Aerostructures and Lockheed Martin

Considering the 90-day investment horizon CPI Aerostructures is expected to generate 4.41 times more return on investment than Lockheed Martin. However, CPI Aerostructures is 4.41 times more volatile than Lockheed Martin. It trades about 0.17 of its potential returns per unit of risk. Lockheed Martin is currently generating about 0.16 per unit of risk. If you would invest  238.00  in CPI Aerostructures on January 30, 2024 and sell it today you would earn a total of  27.00  from holding CPI Aerostructures or generate 11.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

CPI Aerostructures  vs.  Lockheed Martin

CPI Aerostructures

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lockheed Martin

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lockheed Martin are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, Lockheed Martin may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with CPI Aerostructures and Lockheed Martin

The main advantage of trading using opposite CPI Aerostructures and Lockheed Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CPI Aerostructures 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 CPI Aerostructures 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.