Correlation Between General Dynamics and Cadre Holdings

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

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

Diversification Opportunities for General Dynamics and Cadre Holdings

0.46

Correlation Coefficient

General Dynamics  Cadre Holdings

Very weak diversification

The 3 months correlation between General and Cadre is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding General Dynamics and Cadre Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadre Holdings 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 Cadre Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadre Holdings has no effect on the direction of General Dynamics i.e., General Dynamics and Cadre Holdings go up and down completely randomly.

Pair Corralation between General Dynamics and Cadre Holdings

Allowing for the 90-day total investment horizon General Dynamics is expected to generate 3.56 times less return on investment than Cadre Holdings. But when comparing it to its historical volatility, General Dynamics is 1.82 times less risky than Cadre Holdings. It trades about 0.03 of its potential returns per unit of risk. Cadre Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,041  in Cadre Holdings on September 26, 2024 and sell it today you would earn a total of  1,189  from holding Cadre Holdings or generate 58.26% return on investment over 90 days.

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

General Dynamics  vs.  Cadre Holdings

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 unsteady 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.

Cadre Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cadre Holdings 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 basic 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.

Pair Trading with General Dynamics and Cadre Holdings

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

The idea behind General Dynamics and Cadre Holdings 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 Stocks Directory module to find actively traded stocks across global markets.