Correlation Between Safran SA and General Dynamics

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

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

Diversification Opportunities for Safran SA and General Dynamics

0.62

Correlation Coefficient

Safran SA  General Dynamics

Poor diversification

The 3 months correlation between Safran and General is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Safran SA and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics and Safran SA 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 Safran SA 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 Safran SA i.e., Safran SA and General Dynamics go up and down completely randomly.

Pair Corralation between Safran SA and General Dynamics

Assuming the 90 days horizon Safran SA is expected to generate 1.2 times more return on investment than General Dynamics. However, Safran SA is 1.2 times more volatile than General Dynamics. It trades about 0.02 of its potential returns per unit of risk. General Dynamics is currently generating about -0.03 per unit of risk. If you would invest  5,387  in Safran SA on September 30, 2024 and sell it today you would earn a total of  107.00  from holding Safran SA or generate 1.99% return on investment over 90 days.

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

Safran SA  vs.  General Dynamics

Safran SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safran SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Safran SA is not utilizing all of its potentials. The current 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 latest unsteady performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Safran SA and General Dynamics

The main advantage of trading using opposite Safran SA and General Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safran SA 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 Safran SA 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.