Correlation Between General Dynamics and GE Aerospace
Can any of the company-specific risk be diversified away by investing in both General Dynamics and GE Aerospace 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 GE Aerospace into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Dynamics and GE Aerospace, you can compare the effects of market volatilities on General Dynamics and GE Aerospace 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 GE Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Dynamics and GE Aerospace.
Diversification Opportunities for General Dynamics and GE Aerospace
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between General and GE Aerospace is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding General Dynamics and GE Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE Aerospace 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 GE Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE Aerospace has no effect on the direction of General Dynamics i.e., General Dynamics and GE Aerospace go up and down completely randomly.
Pair Corralation between General Dynamics and GE Aerospace
Allowing for the 90-day total investment horizon General Dynamics is expected to under-perform the GE Aerospace. But the stock apears to be less risky and, when comparing its historical volatility, General Dynamics is 1.41 times less risky than GE Aerospace. The stock trades about -0.15 of its potential returns per unit of risk. The GE Aerospace is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 18,614 in GE Aerospace on November 1, 2024 and sell it today you would earn a total of 1,296 from holding GE Aerospace or generate 6.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Dynamics vs. GE Aerospace
Performance |
| Timeline |
| General Dynamics |
| GE Aerospace |
General Dynamics and GE Aerospace Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with General Dynamics and GE Aerospace
The main advantage of trading using opposite General Dynamics and GE Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Dynamics position performs unexpectedly, GE Aerospace 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 GE Aerospace will offset losses from the drop in GE Aerospace'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 |
| GE Aerospace vs. Illinois Tool Works | GE Aerospace vs. Dover | GE Aerospace vs. Cummins | GE Aerospace vs. Eaton PLC |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital |