Correlation Between General Dynamics and AviChina Industry

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

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

Diversification Opportunities for General Dynamics and AviChina Industry

-0.56

Correlation Coefficient

General Dynamics  AviChina Industry

Excellent diversification

The 3 months correlation between General and AviChina is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding General Dynamics and AviChina Industry Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AviChina Industry and General Dynamics 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 General Dynamics are associated (or correlated) with AviChina Industry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AviChina Industry has no effect on the direction of General Dynamics i.e., General Dynamics and AviChina Industry go up and down completely randomly.

Pair Corralation between General Dynamics and AviChina Industry

If you would invest  36.00  in AviChina Industry Technology on February 2, 2024 and sell it today you would earn a total of  0.00  from holding AviChina Industry Technology or generate 0.0% return on investment over 90 days.

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

General Dynamics  vs.  AviChina Industry Technology

General Dynamics

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Dynamics are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, General Dynamics may actually be approaching a critical reversion point that can send shares even higher in June 2024.

AviChina Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AviChina Industry Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward-looking indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with General Dynamics and AviChina Industry

The main advantage of trading using opposite General Dynamics and AviChina Industry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Dynamics position performs unexpectedly, AviChina Industry 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 AviChina Industry will offset losses from the drop in AviChina Industry's long position.

The idea behind General Dynamics and AviChina Industry Technology 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 Stocks Directory module to find actively traded stocks across global markets.