Correlation Between Virgin Galactic and General Dynamics

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

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

Diversification Opportunities for Virgin Galactic and General Dynamics

0.11

Correlation Coefficient

Virgin Galactic  General Dynamics

Average diversification

The 3 months correlation between Virgin and General is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Virgin Galactic Holdings and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics and Virgin Galactic 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 Virgin Galactic Holdings 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 Virgin Galactic i.e., Virgin Galactic and General Dynamics go up and down completely randomly.

Pair Corralation between Virgin Galactic and General Dynamics

Given the investment horizon of 90 days Virgin Galactic Holdings is expected to under-perform the General Dynamics. In addition to that, Virgin Galactic is 3.43 times more volatile than General Dynamics. It trades about -0.18 of its total potential returns per unit of risk. General Dynamics is currently generating about 0.04 per unit of volatility. If you would invest  26,199  in General Dynamics on December 28, 2024 and sell it today you would earn a total of  750.00  from holding General Dynamics or generate 2.86% return on investment over 90 days.

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

Virgin Galactic Holdings  vs.  General Dynamics

Virgin Galactic Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virgin Galactic Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

General Dynamics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in General Dynamics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, General Dynamics is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Virgin Galactic and General Dynamics

The main advantage of trading using opposite Virgin Galactic and General Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virgin Galactic 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 Virgin Galactic Holdings 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.