Correlation Between British American and General Dynamics
Can any of the company-specific risk be diversified away by investing in both British American 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 British American and General Dynamics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and General Dynamics, you can compare the effects of market volatilities on British American 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 British American with a short position of General Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and General Dynamics.
Diversification Opportunities for British American and General Dynamics
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between British and General is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics and British American 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 British American Tobacco 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 British American i.e., British American and General Dynamics go up and down completely randomly.
Pair Corralation between British American and General Dynamics
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.88 times more return on investment than General Dynamics. However, British American Tobacco is 1.14 times less risky than General Dynamics. It trades about 0.06 of its potential returns per unit of risk. General Dynamics is currently generating about -0.01 per unit of risk. If you would invest 4,314 in British American Tobacco on September 12, 2024 and sell it today you would earn a total of 181.00 from holding British American Tobacco or generate 4.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.41% |
| Values | Daily Returns |
British American Tobacco vs. General Dynamics
Performance |
| Timeline |
| British American Tobacco |
| General Dynamics |
British American and General Dynamics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and General Dynamics
The main advantage of trading using opposite British American and General Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American 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.| British American vs. Fundo Investimento Imobiliario | British American vs. LESTE FDO INV | British American vs. Fras le SA | British American vs. Western Digital |
| General Dynamics vs. The Trade Desk | General Dynamics vs. Unity Software | General Dynamics vs. salesforce inc | General Dynamics vs. MAHLE Metal Leve |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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