Correlation Between General Dynamics and Raytheon Technologies
Can any of the company-specific risk be diversified away by investing in both General Dynamics and Raytheon Technologies 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 Raytheon Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Dynamics and Raytheon Technologies, you can compare the effects of market volatilities on General Dynamics and Raytheon Technologies 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 Raytheon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Dynamics and Raytheon Technologies.
Diversification Opportunities for General Dynamics and Raytheon Technologies
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between General and Raytheon is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding General Dynamics and Raytheon Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies 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 Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of General Dynamics i.e., General Dynamics and Raytheon Technologies go up and down completely randomly.
Pair Corralation between General Dynamics and Raytheon Technologies
Assuming the 90 days trading horizon General Dynamics is expected to generate 1.44 times less return on investment than Raytheon Technologies. But when comparing it to its historical volatility, General Dynamics is 1.03 times less risky than Raytheon Technologies. It trades about 0.03 of its potential returns per unit of risk. Raytheon Technologies is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 8,488 in Raytheon Technologies on August 23, 2024 and sell it today you would earn a total of 3,179 from holding Raytheon Technologies or generate 37.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.6% |
| Values | Daily Returns |
General Dynamics vs. Raytheon Technologies
Performance |
| Timeline |
| General Dynamics |
| Raytheon Technologies |
General Dynamics and Raytheon Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with General Dynamics and Raytheon Technologies
The main advantage of trading using opposite General Dynamics and Raytheon Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Dynamics position performs unexpectedly, Raytheon Technologies 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 Raytheon Technologies will offset losses from the drop in Raytheon Technologies' long position.| General Dynamics vs. Raytheon Technologies | General Dynamics vs. The Boeing | General Dynamics vs. Lockheed Martin | General Dynamics vs. Northrop Grumman |
| Raytheon Technologies vs. The Boeing | Raytheon Technologies vs. Lockheed Martin | Raytheon Technologies vs. Northrop Grumman |
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.
Other Complementary Tools
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |