Correlation Between General Dynamics and SCHMID Group

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

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

Diversification Opportunities for General Dynamics and SCHMID Group

0.32

Correlation Coefficient

General Dynamics  SCHMID Group

Weak diversification

The 3 months correlation between General and SCHMID is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding General Dynamics and SCHMID Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCHMID Group NV 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 SCHMID Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCHMID Group NV has no effect on the direction of General Dynamics i.e., General Dynamics and SCHMID Group go up and down completely randomly.

Pair Corralation between General Dynamics and SCHMID Group

Allowing for the 90-day total investment horizon General Dynamics is expected to generate 0.18 times more return on investment than SCHMID Group. However, General Dynamics is 5.46 times less risky than SCHMID Group. It trades about 0.04 of its potential returns per unit of risk. SCHMID Group NV is currently generating about -0.13 per unit of risk. If you would invest  23,819  in General Dynamics on September 3, 2024 and sell it today you would earn a total of  4,582  from holding General Dynamics or generate 19.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	30.51%
Values	Daily Returns

General Dynamics  vs.  SCHMID Group NV

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 rather sound fundamental indicators, General Dynamics is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

SCHMID Group NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SCHMID Group NV 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 primary 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 SCHMID Group

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

The idea behind General Dynamics and SCHMID Group NV 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.