Correlation Between General Dynamics and Alfa SAB

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

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

Diversification Opportunities for General Dynamics and Alfa SAB

-0.28

Correlation Coefficient

General Dynamics  Alfa SAB

Very good diversification

The 3 months correlation between General and Alfa is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding General Dynamics and Alfa SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa SAB de and General Dynamics 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 General Dynamics are associated (or correlated) with Alfa SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa SAB de has no effect on the direction of General Dynamics i.e., General Dynamics and Alfa SAB go up and down completely randomly.

Pair Corralation between General Dynamics and Alfa SAB

Assuming the 90 days horizon General Dynamics is expected to under-perform the Alfa SAB. But the stock apears to be less risky and, when comparing its historical volatility, General Dynamics is 1.98 times less risky than Alfa SAB. The stock trades about -0.15 of its potential returns per unit of risk. The Alfa SAB de is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,497  in Alfa SAB de on October 13, 2024 and sell it today you would earn a total of  48.00  from holding Alfa SAB de or generate 3.21% return on investment over 90 days.

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

General Dynamics  vs.  Alfa SAB de

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.

Alfa SAB de

Risk-Adjusted Performance

2 of 100

Weak

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.

Pair Trading with General Dynamics and Alfa SAB

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

The idea behind General Dynamics and Alfa SAB de 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.