Correlation Between Rockwell Collins and General Dynamics

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

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

Diversification Opportunities for Rockwell Collins and General Dynamics

0.0

Correlation Coefficient

Rockwell Collins  General Dynamics

Pay attention - limited upside

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

Pair Corralation between Rockwell Collins and General Dynamics

If you would invest  27,226  in General Dynamics on March 5, 2024 and sell it today you would earn a total of  2,751  from holding General Dynamics or generate 10.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Rockwell Collins  vs.  General Dynamics

Rockwell Collins

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rockwell Collins has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Rockwell Collins is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

General Dynamics

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Dynamics are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, General Dynamics may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Rockwell Collins and General Dynamics

The main advantage of trading using opposite Rockwell Collins and General Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rockwell Collins 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 Rockwell Collins 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.