Correlation Between BlackRock and General Dynamics

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

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

Diversification Opportunities for BlackRock and General Dynamics

-0.19

Correlation Coefficient

BlackRock  General Dynamics

Good diversification

The 3 months correlation between BlackRock and General is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics and BlackRock 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 BlackRock 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 BlackRock i.e., BlackRock and General Dynamics go up and down completely randomly.

Pair Corralation between BlackRock and General Dynamics

Assuming the 90 days trading horizon BlackRock is expected to generate 1.0 times more return on investment than General Dynamics. However, BlackRock is 1.0 times more volatile than General Dynamics. It trades about -0.09 of its potential returns per unit of risk. General Dynamics is currently generating about -0.3 per unit of risk. If you would invest  2,113,481  in BlackRock on September 24, 2024 and sell it today you would lose (52,781) from holding BlackRock or give up 2.5% of portfolio value over 90 days.

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

BlackRock  vs.  General Dynamics

BlackRock

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, BlackRock showed 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. 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 BlackRock and General Dynamics

The main advantage of trading using opposite BlackRock and General Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlackRock 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 BlackRock 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.