Correlation Between Boeing and Lockheed Martin

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

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

Diversification Opportunities for Boeing and Lockheed Martin

-0.22

Correlation Coefficient

Boeing  Lockheed Martin

Very good diversification

The 3 months correlation between Boeing and Lockheed is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin and Boeing 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 The Boeing 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 Boeing i.e., Boeing and Lockheed Martin go up and down completely randomly.

Pair Corralation between Boeing and Lockheed Martin

Allowing for the 90-day total investment horizon The Boeing is expected to under-perform the Lockheed Martin. In addition to that, Boeing is 1.45 times more volatile than Lockheed Martin. It trades about -0.11 of its total potential returns per unit of risk. Lockheed Martin is currently generating about -0.05 per unit of volatility. If you would invest  46,541  in Lockheed Martin on January 8, 2025 and sell it today you would lose (3,459) from holding Lockheed Martin or give up 7.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

The Boeing  vs.  Lockheed Martin

Boeing

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Boeing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Lockheed Martin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lockheed Martin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Boeing and Lockheed Martin

The main advantage of trading using opposite Boeing and Lockheed Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing 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 The Boeing 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.