Correlation Between First Republic and General Dynamics

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

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

Diversification Opportunities for First Republic and General Dynamics

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Correlation Coefficient

First Republic  General Dynamics

Pay attention - limited upside

The 3 months correlation between First and General is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First Republic Bank and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics and First Republic 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 First Republic Bank 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 First Republic i.e., First Republic and General Dynamics go up and down completely randomly.

Pair Corralation between First Republic and General Dynamics

Assuming the 90 days trading horizon First Republic Bank is expected to under-perform the General Dynamics. In addition to that, First Republic is 5.28 times more volatile than General Dynamics. It trades about -0.08 of its total potential returns per unit of risk. General Dynamics is currently generating about 0.06 per unit of volatility. If you would invest  411,056  in General Dynamics on October 21, 2024 and sell it today you would earn a total of  130,702  from holding General Dynamics or generate 31.8% return on investment over 90 days.

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

First Republic Bank  vs.  General Dynamics

First Republic Bank

Risk-Adjusted Performance

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Very Weak

Over the last 90 days First Republic Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, First Republic is not utilizing all of its potentials. The current stock price disturbance, 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 First Republic and General Dynamics

The main advantage of trading using opposite First Republic and General Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Republic 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 First Republic Bank 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.