Correlation Between Eve Holding and General Dynamics

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

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

Diversification Opportunities for Eve Holding and General Dynamics

-0.67

Correlation Coefficient

Eve Holding  General Dynamics

Excellent diversification

The 3 months correlation between Eve and General is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Eve Holding and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics and Eve Holding 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 Eve Holding 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 Eve Holding i.e., Eve Holding and General Dynamics go up and down completely randomly.

Pair Corralation between Eve Holding and General Dynamics

Given the investment horizon of 90 days Eve Holding is expected to generate 2.82 times more return on investment than General Dynamics. However, Eve Holding is 2.82 times more volatile than General Dynamics. It trades about 0.21 of its potential returns per unit of risk. General Dynamics is currently generating about -0.11 per unit of risk. If you would invest  281.00  in Eve Holding on September 12, 2024 and sell it today you would earn a total of  171.00  from holding Eve Holding or generate 60.85% return on investment over 90 days.

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

Eve Holding  vs.  General Dynamics

Eve Holding

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eve Holding are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical and fundamental indicators, Eve Holding 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 uncertain performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Eve Holding and General Dynamics

The main advantage of trading using opposite Eve Holding and General Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eve Holding 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 Eve Holding 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 Transaction History module to view history of all your transactions and understand their impact on performance.