Correlation Between General Dynamics and Textron
Can any of the company-specific risk be diversified away by investing in both General Dynamics and Textron 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 Textron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Dynamics and Textron, you can compare the effects of market volatilities on General Dynamics and Textron 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 Textron. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Dynamics and Textron.
Diversification Opportunities for General Dynamics and Textron
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between General and Textron is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding General Dynamics and Textron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Textron 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 Textron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Textron has no effect on the direction of General Dynamics i.e., General Dynamics and Textron go up and down completely randomly.
Pair Corralation between General Dynamics and Textron
Assuming the 90 days horizon General Dynamics is expected to under-perform the Textron. But the stock apears to be less risky and, when comparing its historical volatility, General Dynamics is 1.42 times less risky than Textron. The stock trades about -0.12 of its potential returns per unit of risk. The Textron is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 158,723 in Textron on November 2, 2024 and sell it today you would earn a total of 5,667 from holding Textron or generate 3.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Dynamics vs. Textron
Performance |
| Timeline |
| General Dynamics |
| Textron |
General Dynamics and Textron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with General Dynamics and Textron
The main advantage of trading using opposite General Dynamics and Textron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Dynamics position performs unexpectedly, Textron 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 Textron will offset losses from the drop in Textron's long position.| General Dynamics vs. United Airlines Holdings | General Dynamics vs. Southern Copper | General Dynamics vs. United States Steel | General Dynamics vs. DXC Technology |
| Textron vs. The Boeing | Textron vs. Lockheed Martin | Textron vs. General Dynamics | Textron vs. The Walt Disney |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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