Correlation Between Raytheon Technologies and General Dynamics
Can any of the company-specific risk be diversified away by investing in both Raytheon Technologies 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 Raytheon Technologies and General Dynamics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Raytheon Technologies and General Dynamics, you can compare the effects of market volatilities on Raytheon Technologies 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 Raytheon Technologies with a short position of General Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Raytheon Technologies and General Dynamics.
Diversification Opportunities for Raytheon Technologies and General Dynamics
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Raytheon and General is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Raytheon Technologies and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics and Raytheon Technologies 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 Raytheon Technologies 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 Raytheon Technologies i.e., Raytheon Technologies and General Dynamics go up and down completely randomly.
Pair Corralation between Raytheon Technologies and General Dynamics
Assuming the 90 days trading horizon Raytheon Technologies is expected to generate 1.03 times more return on investment than General Dynamics. However, Raytheon Technologies is 1.03 times more volatile than General Dynamics. It trades about 0.05 of its potential returns per unit of risk. General Dynamics is currently generating about 0.03 per unit of risk. 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 |
Raytheon Technologies vs. General Dynamics
Performance |
| Timeline |
| Raytheon Technologies |
| General Dynamics |
Raytheon Technologies and General Dynamics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Raytheon Technologies and General Dynamics
The main advantage of trading using opposite Raytheon Technologies and General Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Raytheon Technologies 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.| Raytheon Technologies vs. The Boeing | Raytheon Technologies vs. Lockheed Martin | Raytheon Technologies vs. Northrop Grumman |
| General Dynamics vs. Raytheon Technologies | General Dynamics vs. The Boeing | General Dynamics vs. Lockheed Martin | General Dynamics 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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