Correlation Between Textron and General Dynamics

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

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

Diversification Opportunities for Textron and General Dynamics

0.0

Correlation Coefficient

Textron  General Dynamics

Pay attention - limited upside

The 3 months correlation between Textron and General is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Textron and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics and Textron 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 Textron 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 Textron i.e., Textron and General Dynamics go up and down completely randomly.

Pair Corralation between Textron and General Dynamics

If you would invest  0.00  in Textron on December 30, 2024 and sell it today you would earn a total of  0.00  from holding Textron or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.61%
Values	Daily Returns

Textron  vs.  General Dynamics

Textron

Risk-Adjusted Performance

Very Weak

Over the last 90 days Textron has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Textron 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

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 fairly strong primary indicators, 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 Textron and General Dynamics

The main advantage of trading using opposite Textron and General Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Textron 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 Textron 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 Commodity Directory module to find actively traded commodities issued by global exchanges.