Correlation Between Orbital ATK and General Dynamics

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

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

Diversification Opportunities for Orbital ATK and General Dynamics

0.0

Correlation Coefficient

Orbital ATK  General Dynamics

Pay attention - limited upside

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

Pair Corralation between Orbital ATK and General Dynamics

If you would invest  27,761  in General Dynamics on January 24, 2024 and sell it today you would earn a total of  1,511  from holding General Dynamics or generate 5.44% return on investment over 90 days.

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

Orbital ATK  vs.  General Dynamics

Orbital ATK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orbital ATK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Orbital ATK 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

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in General Dynamics are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, General Dynamics may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Orbital ATK and General Dynamics

The main advantage of trading using opposite Orbital ATK and General Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orbital ATK 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 Orbital ATK 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.