Correlation Between HEICO and General Dynamics

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

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

Diversification Opportunities for HEICO and General Dynamics

-0.34

Correlation Coefficient

HEICO  General Dynamics

Very good diversification

The 3 months correlation between HEICO and General is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding HEICO and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics and HEICO 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 HEICO 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 HEICO i.e., HEICO and General Dynamics go up and down completely randomly.

Pair Corralation between HEICO and General Dynamics

Assuming the 90 days horizon HEICO is expected to generate 0.9 times more return on investment than General Dynamics. However, HEICO is 1.11 times less risky than General Dynamics. It trades about 0.08 of its potential returns per unit of risk. General Dynamics is currently generating about -0.05 per unit of risk. If you would invest  19,658  in HEICO on September 4, 2024 and sell it today you would earn a total of  1,166  from holding HEICO or generate 5.93% return on investment over 90 days.

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

HEICO  vs.  General Dynamics

HEICO

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HEICO are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HEICO is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the 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. In spite of rather sound fundamental indicators, General Dynamics is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with HEICO and General Dynamics

The main advantage of trading using opposite HEICO and General Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HEICO 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 HEICO 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.