Correlation Between MAHLE Metal and General Dynamics
Can any of the company-specific risk be diversified away by investing in both MAHLE Metal 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 MAHLE Metal and General Dynamics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MAHLE Metal Leve and General Dynamics, you can compare the effects of market volatilities on MAHLE Metal 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 MAHLE Metal with a short position of General Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of MAHLE Metal and General Dynamics.
Diversification Opportunities for MAHLE Metal and General Dynamics
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between MAHLE and General is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding MAHLE Metal Leve and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics and MAHLE Metal 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 MAHLE Metal Leve 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 MAHLE Metal i.e., MAHLE Metal and General Dynamics go up and down completely randomly.
Pair Corralation between MAHLE Metal and General Dynamics
Assuming the 90 days trading horizon MAHLE Metal Leve is expected to under-perform the General Dynamics. In addition to that, MAHLE Metal is 1.82 times more volatile than General Dynamics. It trades about -0.01 of its total potential returns per unit of risk. General Dynamics is currently generating about 0.12 per unit of volatility. If you would invest 102,092 in General Dynamics on September 12, 2024 and sell it today you would earn a total of 63,094 from holding General Dynamics or generate 61.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 88.14% |
| Values | Daily Returns |
MAHLE Metal Leve vs. General Dynamics
Performance |
| Timeline |
| MAHLE Metal Leve |
| General Dynamics |
MAHLE Metal and General Dynamics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MAHLE Metal and General Dynamics
The main advantage of trading using opposite MAHLE Metal and General Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAHLE Metal 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.| MAHLE Metal vs. Tupy SA | MAHLE Metal vs. Engie Brasil Energia | MAHLE Metal vs. Grendene SA | MAHLE Metal vs. M Dias Branco |
| General Dynamics vs. The Trade Desk | General Dynamics vs. Unity Software | General Dynamics vs. salesforce inc | General Dynamics vs. MAHLE Metal Leve |
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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