Correlation Between General Dynamics and AAC Clyde

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

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

Diversification Opportunities for General Dynamics and AAC Clyde

-0.67

Correlation Coefficient

General Dynamics  AAC Clyde

Excellent diversification

The 3 months correlation between General and AAC is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding General Dynamics and AAC Clyde Space in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAC Clyde Space 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 AAC Clyde. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAC Clyde Space has no effect on the direction of General Dynamics i.e., General Dynamics and AAC Clyde go up and down completely randomly.

Pair Corralation between General Dynamics and AAC Clyde

Allowing for the 90-day total investment horizon General Dynamics is expected to under-perform the AAC Clyde. But the stock apears to be less risky and, when comparing its historical volatility, General Dynamics is 2.26 times less risky than AAC Clyde. The stock trades about -0.16 of its potential returns per unit of risk. The AAC Clyde Space is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  323.00  in AAC Clyde Space on September 16, 2024 and sell it today you would earn a total of  87.00  from holding AAC Clyde Space or generate 26.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

General Dynamics  vs.  AAC Clyde Space

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 weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

AAC Clyde Space

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AAC Clyde Space are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent primary indicators, AAC Clyde reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with General Dynamics and AAC Clyde

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

The idea behind General Dynamics and AAC Clyde Space 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..