Correlation Between General Dynamics and BlackRock

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

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

Diversification Opportunities for General Dynamics and BlackRock

-0.19

Correlation Coefficient

General Dynamics  BlackRock

Good diversification

The 3 months correlation between General and BlackRock is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding General Dynamics and BlackRock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock 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 BlackRock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock has no effect on the direction of General Dynamics i.e., General Dynamics and BlackRock go up and down completely randomly.

Pair Corralation between General Dynamics and BlackRock

Assuming the 90 days horizon General Dynamics is expected to under-perform the BlackRock. But the stock apears to be less risky and, when comparing its historical volatility, General Dynamics is 1.0 times less risky than BlackRock. The stock trades about -0.3 of its potential returns per unit of risk. The BlackRock is currently generating about -0.09 of returns per unit of risk over similar time horizon. 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

General Dynamics  vs.  BlackRock

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.

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.

Pair Trading with General Dynamics and BlackRock

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

The idea behind General Dynamics and BlackRock 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.