Correlation Between Lockheed Martin and Textron

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

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

Diversification Opportunities for Lockheed Martin and Textron

-0.38

Correlation Coefficient

Lockheed Martin  Textron

Very good diversification

The 3 months correlation between Lockheed and Textron is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin and Textron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Textron 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 Textron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Textron has no effect on the direction of Lockheed Martin i.e., Lockheed Martin and Textron go up and down completely randomly.

Pair Corralation between Lockheed Martin and Textron

Assuming the 90 days horizon Lockheed Martin is expected to under-perform the Textron. But the stock apears to be less risky and, when comparing its historical volatility, Lockheed Martin is 1.01 times less risky than Textron. The stock trades about -0.01 of its potential returns per unit of risk. The Textron is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  5,611  in Textron on April 22, 2025 and sell it today you would earn a total of  1,689  from holding Textron or generate 30.1% return on investment over 90 days.

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

Lockheed Martin  vs.  Textron

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. Despite nearly stable basic indicators, Lockheed Martin is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Textron

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Textron are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Textron reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lockheed Martin and Textron

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

The idea behind Lockheed Martin and Textron 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.