Correlation Between General Dynamics and NORDIC HALIBUT

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

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

Diversification Opportunities for General Dynamics and NORDIC HALIBUT

0.41

Correlation Coefficient

General Dynamics  NORDIC HALIBUT

Very weak diversification

The 3 months correlation between General and NORDIC is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding General Dynamics and NORDIC HALIBUT AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORDIC HALIBUT AS 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 NORDIC HALIBUT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORDIC HALIBUT AS has no effect on the direction of General Dynamics i.e., General Dynamics and NORDIC HALIBUT go up and down completely randomly.

Pair Corralation between General Dynamics and NORDIC HALIBUT

Assuming the 90 days horizon General Dynamics is expected to generate 0.68 times more return on investment than NORDIC HALIBUT. However, General Dynamics is 1.47 times less risky than NORDIC HALIBUT. It trades about -0.03 of its potential returns per unit of risk. NORDIC HALIBUT AS is currently generating about -0.16 per unit of risk. If you would invest  26,904  in General Dynamics on September 13, 2024 and sell it today you would lose (1,114) from holding General Dynamics or give up 4.14% of portfolio value over 90 days.

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

General Dynamics  vs.  NORDIC HALIBUT AS

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. Despite nearly stable basic indicators, General Dynamics is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

NORDIC HALIBUT AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NORDIC HALIBUT AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with General Dynamics and NORDIC HALIBUT

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

The idea behind General Dynamics and NORDIC HALIBUT AS 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.