Correlation Between General Dynamics and Thales SA

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

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

Diversification Opportunities for General Dynamics and Thales SA

-0.64

Correlation Coefficient

General Dynamics  Thales SA

Excellent diversification

The 3 months correlation between General and Thales is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding General Dynamics and Thales SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thales SA ADR 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 Thales SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thales SA ADR has no effect on the direction of General Dynamics i.e., General Dynamics and Thales SA go up and down completely randomly.

Pair Corralation between General Dynamics and Thales SA

Allowing for the 90-day total investment horizon General Dynamics is expected to under-perform the Thales SA. But the stock apears to be less risky and, when comparing its historical volatility, General Dynamics is 2.43 times less risky than Thales SA. The stock trades about -0.07 of its potential returns per unit of risk. The Thales SA ADR is currently generating about 0.46 of returns per unit of risk over similar time horizon. If you would invest  3,229  in Thales SA ADR on December 2, 2024 and sell it today you would earn a total of  871.00  from holding Thales SA ADR or generate 26.97% return on investment over 90 days.

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

General Dynamics  vs.  Thales SA ADR

General Dynamics

Risk-Adjusted Performance

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 uncertain 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.

Thales SA ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Thales SA ADR are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Thales SA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with General Dynamics and Thales SA

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

The idea behind General Dynamics and Thales SA ADR 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.