Correlation Between H1II34 and General Dynamics

Can any of the company-specific risk be diversified away by investing in both H1II34 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 H1II34 and General Dynamics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between H1II34 and General Dynamics, you can compare the effects of market volatilities on H1II34 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 H1II34 with a short position of General Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of H1II34 and General Dynamics.

Diversification Opportunities for H1II34 and General Dynamics

0.16

Correlation Coefficient

H1II34  General Dynamics

Average diversification

The 3 months correlation between H1II34 and General is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding H1II34 and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics and H1II34 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 H1II34 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 H1II34 i.e., H1II34 and General Dynamics go up and down completely randomly.

Pair Corralation between H1II34 and General Dynamics

Assuming the 90 days trading horizon H1II34 is expected to under-perform the General Dynamics. In addition to that, H1II34 is 1.78 times more volatile than General Dynamics. It trades about -0.03 of its total potential returns per unit of risk. General Dynamics is currently generating about 0.02 per unit of volatility. If you would invest  163,163  in General Dynamics on September 27, 2024 and sell it today you would earn a total of  517.00  from holding General Dynamics or generate 0.32% return on investment over 90 days.

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

H1II34  vs.  General Dynamics

H1II34

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days H1II34 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 somewhat strong fundamental drivers, General Dynamics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with H1II34 and General Dynamics

The main advantage of trading using opposite H1II34 and General Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if H1II34 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 H1II34 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.