Correlation Between 90331HPL1 and GENERAL

Can any of the company-specific risk be diversified away by investing in both 90331HPL1 and GENERAL 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 90331HPL1 and GENERAL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US BANK NATIONAL and GENERAL DYNAMICS PORATION, you can compare the effects of market volatilities on 90331HPL1 and GENERAL 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 90331HPL1 with a short position of GENERAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of 90331HPL1 and GENERAL.

Diversification Opportunities for 90331HPL1 and GENERAL

0.67

Correlation Coefficient

90331HPL1  GENERAL

Poor diversification

The 3 months correlation between 90331HPL1 and GENERAL is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding US BANK NATIONAL and GENERAL DYNAMICS PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GENERAL DYNAMICS PORATION and 90331HPL1 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 US BANK NATIONAL are associated (or correlated) with GENERAL. 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 PORATION has no effect on the direction of 90331HPL1 i.e., 90331HPL1 and GENERAL go up and down completely randomly.

Pair Corralation between 90331HPL1 and GENERAL

Assuming the 90 days trading horizon US BANK NATIONAL is expected to generate 0.88 times more return on investment than GENERAL. However, US BANK NATIONAL is 1.13 times less risky than GENERAL. It trades about -0.27 of its potential returns per unit of risk. GENERAL DYNAMICS PORATION is currently generating about -0.27 per unit of risk. If you would invest  9,893  in US BANK NATIONAL on July 12, 2024 and sell it today you would lose (297.00) from holding US BANK NATIONAL or give up 3.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	50.0%
Values	Daily Returns

US BANK NATIONAL  vs.  GENERAL DYNAMICS PORATION

US BANK NATIONAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US BANK NATIONAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 90331HPL1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

GENERAL DYNAMICS PORATION

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GENERAL DYNAMICS PORATION has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GENERAL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with 90331HPL1 and GENERAL

The main advantage of trading using opposite 90331HPL1 and GENERAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 90331HPL1 position performs unexpectedly, GENERAL 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 will offset losses from the drop in GENERAL's long position.

The idea behind US BANK NATIONAL and GENERAL DYNAMICS PORATION pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.