Correlation Between General Dynamics and Steel Partners

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

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

Diversification Opportunities for General Dynamics and Steel Partners

-0.12

Correlation Coefficient

General Dynamics  Steel Partners

Good diversification

The 3 months correlation between General and Steel is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding General Dynamics and Steel Partners Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel Partners 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 Steel Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Partners Holdings has no effect on the direction of General Dynamics i.e., General Dynamics and Steel Partners go up and down completely randomly.

Pair Corralation between General Dynamics and Steel Partners

Allowing for the 90-day total investment horizon General Dynamics is expected to generate 0.46 times more return on investment than Steel Partners. However, General Dynamics is 2.18 times less risky than Steel Partners. It trades about 0.03 of its potential returns per unit of risk. Steel Partners Holdings is currently generating about 0.0 per unit of risk. If you would invest  26,225  in General Dynamics on December 20, 2024 and sell it today you would earn a total of  572.00  from holding General Dynamics or generate 2.18% return on investment over 90 days.

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

General Dynamics  vs.  Steel Partners Holdings

General Dynamics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in General Dynamics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Steel Partners Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Steel Partners Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, Steel Partners is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with General Dynamics and Steel Partners

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

The idea behind General Dynamics and Steel Partners 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.

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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.