Correlation Between General Mills and General Dynamics

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

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

Diversification Opportunities for General Mills and General Dynamics

-0.73

Correlation Coefficient

General Mills  General Dynamics

Pay attention - limited upside

The 3 months correlation between General and General is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding General Mills and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics and General Mills 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 Mills are associated (or correlated) with General Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Dynamics has no effect on the direction of General Mills i.e., General Mills and General Dynamics go up and down completely randomly.

Pair Corralation between General Mills and General Dynamics

Assuming the 90 days trading horizon General Mills is expected to generate 1.32 times more return on investment than General Dynamics. However, General Mills is 1.32 times more volatile than General Dynamics. It trades about 0.1 of its potential returns per unit of risk. General Dynamics is currently generating about -0.03 per unit of risk. If you would invest  8,967  in General Mills on December 26, 2024 and sell it today you would earn a total of  944.00  from holding General Mills or generate 10.53% return on investment over 90 days.

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

General Mills  vs.  General Dynamics

General Mills

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Mills are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, General Mills may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 comparatively stable basic indicators, General Dynamics is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with General Mills and General Dynamics

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

The idea behind General Mills and General Dynamics 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.