Correlation Between Sumitomo Rubber and Lockheed Martin

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

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

Diversification Opportunities for Sumitomo Rubber and Lockheed Martin

0.46

Correlation Coefficient

Sumitomo Rubber  Lockheed Martin

Very weak diversification

The 3 months correlation between Sumitomo and Lockheed is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Rubber Industries and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin and Sumitomo Rubber 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 Sumitomo Rubber Industries 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 Sumitomo Rubber i.e., Sumitomo Rubber and Lockheed Martin go up and down completely randomly.

Pair Corralation between Sumitomo Rubber and Lockheed Martin

Assuming the 90 days horizon Sumitomo Rubber Industries is expected to under-perform the Lockheed Martin. But the stock apears to be less risky and, when comparing its historical volatility, Sumitomo Rubber Industries is 1.04 times less risky than Lockheed Martin. The stock trades about -0.07 of its potential returns per unit of risk. The Lockheed Martin is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  39,757  in Lockheed Martin on April 20, 2025 and sell it today you would earn a total of  273.00  from holding Lockheed Martin or generate 0.69% return on investment over 90 days.

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

Sumitomo Rubber Industries  vs.  Lockheed Martin

Sumitomo Rubber Indu

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sumitomo Rubber Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Lockheed Martin

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lockheed Martin are ranked lower than 1 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sumitomo Rubber and Lockheed Martin

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

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.