Correlation Between General Dynamics and Sunny Optical

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

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

Diversification Opportunities for General Dynamics and Sunny Optical

-0.74

Correlation Coefficient

General Dynamics  Sunny Optical

Pay attention - limited upside

The 3 months correlation between General and Sunny is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding General Dynamics and Sunny Optical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunny Optical Technology 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 Sunny Optical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunny Optical Technology has no effect on the direction of General Dynamics i.e., General Dynamics and Sunny Optical go up and down completely randomly.

Pair Corralation between General Dynamics and Sunny Optical

Assuming the 90 days horizon General Dynamics is expected to generate 0.37 times more return on investment than Sunny Optical. However, General Dynamics is 2.72 times less risky than Sunny Optical. It trades about 0.04 of its potential returns per unit of risk. Sunny Optical Technology is currently generating about 0.0 per unit of risk. If you would invest  20,587  in General Dynamics on October 12, 2024 and sell it today you would earn a total of  4,688  from holding General Dynamics or generate 22.77% 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.  Sunny Optical Technology

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Sunny Optical Technology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sunny Optical Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Sunny Optical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with General Dynamics and Sunny Optical

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

The idea behind General Dynamics and Sunny Optical Technology 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.