Correlation Between General Dynamics and DLH Holdings

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

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

Diversification Opportunities for General Dynamics and DLH Holdings

-0.87

Correlation Coefficient

General Dynamics  DLH Holdings

Pay attention - limited upside

The 3 months correlation between General and DLH is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding General Dynamics and DLH Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DLH Holdings Corp 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 DLH Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DLH Holdings Corp has no effect on the direction of General Dynamics i.e., General Dynamics and DLH Holdings go up and down completely randomly.

Pair Corralation between General Dynamics and DLH Holdings

Allowing for the 90-day total investment horizon General Dynamics is expected to generate 0.38 times more return on investment than DLH Holdings. However, General Dynamics is 2.65 times less risky than DLH Holdings. It trades about 0.16 of its potential returns per unit of risk. DLH Holdings Corp is currently generating about -0.28 per unit of risk. If you would invest  26,882  in General Dynamics on February 9, 2024 and sell it today you would earn a total of  2,392  from holding General Dynamics or generate 8.9% return on investment over 90 days.

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

General Dynamics  vs.  DLH Holdings Corp

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.

DLH Holdings Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DLH Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with General Dynamics and DLH Holdings

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

The idea behind General Dynamics and DLH Holdings Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.