Correlation Between Boeing and General Dynamics
Can any of the company-specific risk be diversified away by investing in both Boeing 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 Boeing and General Dynamics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Boeing Co and General Dynamics, you can compare the effects of market volatilities on Boeing 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 Boeing with a short position of General Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boeing and General Dynamics.
Diversification Opportunities for Boeing and General Dynamics
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Boeing and General is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Boeing Co and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics and Boeing 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 Boeing Co 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 Boeing i.e., Boeing and General Dynamics go up and down completely randomly.
Pair Corralation between Boeing and General Dynamics
Assuming the 90 days horizon Boeing Co is expected to generate 1.03 times more return on investment than General Dynamics. However, Boeing is 1.03 times more volatile than General Dynamics. It trades about 0.02 of its potential returns per unit of risk. General Dynamics is currently generating about -0.09 per unit of risk. If you would invest 5,415 in Boeing Co on August 30, 2024 and sell it today you would earn a total of 25.00 from holding Boeing Co or generate 0.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 52.27% |
| Values | Daily Returns |
Boeing Co vs. General Dynamics
Performance |
| Timeline |
| Boeing |
| General Dynamics |
Boeing and General Dynamics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boeing and General Dynamics
The main advantage of trading using opposite Boeing and General Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing 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 Boeing Co 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.| General Dynamics vs. Lockheed Martin | General Dynamics vs. Raytheon Technologies Corp | General Dynamics vs. L3Harris Technologies | General Dynamics vs. Huntington Ingalls Industries |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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