Correlation Between Lockheed Martin and Intuitive Machines

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

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

Diversification Opportunities for Lockheed Martin and Intuitive Machines

0.62

Correlation Coefficient

Lockheed Martin  Intuitive Machines

Poor diversification

The 3 months correlation between Lockheed and Intuitive is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Intuitive Machines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intuitive Machines 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 Intuitive Machines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intuitive Machines has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Intuitive Machines go up and down completely randomly.

Pair Corralation between Lockheed Martin and Intuitive Machines

Considering the 90-day investment horizon Lockheed Martin is expected to generate 2.63 times less return on investment than Intuitive Machines. But when comparing it to its historical volatility, Lockheed Martin is 7.84 times less risky than Intuitive Machines. It trades about 0.4 of its potential returns per unit of risk. Intuitive Machines is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  419.00  in Intuitive Machines on July 12, 2024 and sell it today you would earn a total of  293.00  from holding Intuitive Machines or generate 69.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Lockheed Martin  vs.  Intuitive Machines

Lockheed Martin

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Lockheed Martin are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady primary indicators, Lockheed Martin unveiled solid returns over the last few months and may actually be approaching a breakup point.

Intuitive Machines

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intuitive Machines are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Intuitive Machines reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lockheed Martin and Intuitive Machines

The main advantage of trading using opposite Lockheed Martin and Intuitive Machines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin position performs unexpectedly, Intuitive Machines 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 Intuitive Machines will offset losses from the drop in Intuitive Machines' long position.

The idea behind Lockheed Martin and Intuitive Machines 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.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.