Correlation Between General Dynamics and AER Energy
Can any of the company-specific risk be diversified away by investing in both General Dynamics and AER Energy 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 AER Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Dynamics and AER Energy Resources, you can compare the effects of market volatilities on General Dynamics and AER Energy 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 AER Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Dynamics and AER Energy.
Diversification Opportunities for General Dynamics and AER Energy
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between General and AER is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding General Dynamics and AER Energy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AER Energy Resources 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 AER Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AER Energy Resources has no effect on the direction of General Dynamics i.e., General Dynamics and AER Energy go up and down completely randomly.
Pair Corralation between General Dynamics and AER Energy
Allowing for the 90-day total investment horizon General Dynamics is expected to generate 26.39 times less return on investment than AER Energy. But when comparing it to its historical volatility, General Dynamics is 46.02 times less risky than AER Energy. It trades about 0.08 of its potential returns per unit of risk. AER Energy Resources is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 0.01 in AER Energy Resources on August 31, 2024 and sell it today you would earn a total of 0.00 from holding AER Energy Resources or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Dynamics vs. AER Energy Resources
Performance |
| Timeline |
| General Dynamics |
| AER Energy Resources |
General Dynamics and AER Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with General Dynamics and AER Energy
The main advantage of trading using opposite General Dynamics and AER Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Dynamics position performs unexpectedly, AER Energy 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 AER Energy will offset losses from the drop in AER Energy's long position.| General Dynamics vs. Lockheed Martin | General Dynamics vs. Raytheon Technologies Corp | General Dynamics vs. L3Harris Technologies | General Dynamics vs. Huntington Ingalls Industries |
| AER Energy vs. Caduceus Software Systems | AER Energy vs. North Springs Resources | AER Energy vs. Nyxio Tech Corp | AER Energy vs. Access Power Co |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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