Correlation Between Textron and General Dynamics
Can any of the company-specific risk be diversified away by investing in both Textron 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 Textron and General Dynamics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Textron and General Dynamics, you can compare the effects of market volatilities on Textron 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 Textron with a short position of General Dynamics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Textron and General Dynamics.
Diversification Opportunities for Textron and General Dynamics
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Textron and General is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Textron and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics and Textron 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 Textron 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 Textron i.e., Textron and General Dynamics go up and down completely randomly.
Pair Corralation between Textron and General Dynamics
Assuming the 90 days trading horizon Textron is expected to generate 1.42 times more return on investment than General Dynamics. However, Textron is 1.42 times more volatile than General Dynamics. It trades about 0.03 of its potential returns per unit of risk. General Dynamics is currently generating about -0.12 per unit of risk. If you would invest 158,723 in Textron on November 2, 2024 and sell it today you would earn a total of 5,667 from holding Textron or generate 3.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Textron vs. General Dynamics
Performance |
| Timeline |
| Textron |
| General Dynamics |
Textron and General Dynamics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Textron and General Dynamics
The main advantage of trading using opposite Textron and General Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Textron 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.| Textron vs. The Boeing | Textron vs. Lockheed Martin | Textron vs. General Dynamics | Textron vs. The Walt Disney |
| General Dynamics vs. United Airlines Holdings | General Dynamics vs. Southern Copper | General Dynamics vs. United States Steel | General Dynamics vs. DXC Technology |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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