Correlation Between General Dynamics and KWESST Micro

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

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

Diversification Opportunities for General Dynamics and KWESST Micro

0.61

Correlation Coefficient

General Dynamics  KWESST Micro

Poor diversification

The 3 months correlation between General and KWESST is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding General Dynamics and KWESST Micro Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KWESST Micro Systems 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 KWESST Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KWESST Micro Systems has no effect on the direction of General Dynamics i.e., General Dynamics and KWESST Micro go up and down completely randomly.

Pair Corralation between General Dynamics and KWESST Micro

Allowing for the 90-day total investment horizon General Dynamics is expected to generate 0.08 times more return on investment than KWESST Micro. However, General Dynamics is 12.11 times less risky than KWESST Micro. It trades about 0.04 of its potential returns per unit of risk. KWESST Micro Systems is currently generating about -0.03 per unit of risk. If you would invest  24,036  in General Dynamics on September 23, 2024 and sell it today you would earn a total of  2,328  from holding General Dynamics or generate 9.69% return on investment over 90 days.

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

General Dynamics  vs.  KWESST Micro Systems

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 abnormal 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.

KWESST Micro Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KWESST Micro Systems 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 KWESST Micro

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

The idea behind General Dynamics and KWESST Micro Systems 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..