Correlation Between Alfa SAB and General Dynamics

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

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

Diversification Opportunities for Alfa SAB and General Dynamics

-0.28

Correlation Coefficient

Alfa SAB  General Dynamics

Very good diversification

The 3 months correlation between Alfa and General is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Alfa SAB de and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics and Alfa SAB 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 Alfa SAB de 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 Alfa SAB i.e., Alfa SAB and General Dynamics go up and down completely randomly.

Pair Corralation between Alfa SAB and General Dynamics

Assuming the 90 days trading horizon Alfa SAB de is expected to generate 1.68 times more return on investment than General Dynamics. However, Alfa SAB is 1.68 times more volatile than General Dynamics. It trades about 0.03 of its potential returns per unit of risk. General Dynamics is currently generating about -0.3 per unit of risk. If you would invest  1,505  in Alfa SAB de on September 24, 2024 and sell it today you would earn a total of  14.00  from holding Alfa SAB de or generate 0.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Alfa SAB de  vs.  General Dynamics

Alfa SAB de

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa SAB de are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Alfa SAB is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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. In spite of latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Alfa SAB and General Dynamics

The main advantage of trading using opposite Alfa SAB and General Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alfa SAB 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 Alfa SAB de 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.