Correlation Between Airbus SE and General Dynamics

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

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

Diversification Opportunities for Airbus SE and General Dynamics

-0.79

Correlation Coefficient

Airbus SE  General Dynamics

Pay attention - limited upside

The 3 months correlation between Airbus and General is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Airbus SE and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics and Airbus SE 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 Airbus SE are associated (or correlated) with General Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Dynamics has no effect on the direction of Airbus SE i.e., Airbus SE and General Dynamics go up and down completely randomly.

Pair Corralation between Airbus SE and General Dynamics

Assuming the 90 days trading horizon Airbus SE is expected to generate 1.54 times more return on investment than General Dynamics. However, Airbus SE is 1.54 times more volatile than General Dynamics. It trades about 0.17 of its potential returns per unit of risk. General Dynamics is currently generating about 0.22 per unit of risk. If you would invest  15,480  in Airbus SE on October 21, 2024 and sell it today you would earn a total of  600.00  from holding Airbus SE or generate 3.88% return on investment over 90 days.

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

Airbus SE  vs.  General Dynamics

Airbus SE

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Airbus SE are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Airbus SE unveiled solid returns over the last few months and may actually be approaching a breakup point.

General Dynamics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General Dynamics 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.

Pair Trading with Airbus SE and General Dynamics

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

The idea behind Airbus SE and General Dynamics 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.