Correlation Between General Dynamics and Amazon

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Can any of the company-specific risk be diversified away by investing in both General Dynamics and Amazon 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 Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Dynamics Corp and Amazon Inc, you can compare the effects of market volatilities on General Dynamics and Amazon 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 Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Dynamics and Amazon.

Diversification Opportunities for General Dynamics and Amazon

-0.67
  Correlation Coefficient

Excellent diversification

The 3 months correlation between General and Amazon is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding General Dynamics Corp and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Corp are associated (or correlated) with Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of General Dynamics i.e., General Dynamics and Amazon go up and down completely randomly.

Pair Corralation between General Dynamics and Amazon

Allowing for the 90-day total investment horizon General Dynamics Corp is expected to generate 0.5 times more return on investment than Amazon. However, General Dynamics Corp is 1.99 times less risky than Amazon. It trades about 0.07 of its potential returns per unit of risk. Amazon Inc is currently generating about -0.04 per unit of risk. If you would invest  18,526  in General Dynamics Corp on August 30, 2022 and sell it today you would earn a total of  6,851  from holding General Dynamics Corp or generate 36.98% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

General Dynamics Corp  vs.  Amazon Inc

 Performance (%) 
       Timeline  
General Dynamics Corp 
General Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in General Dynamics Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, General Dynamics may actually be approaching a critical reversion point that can send shares even higher in December 2022.

General Price Channel

Amazon Inc 
Amazon Performance
0 of 100
Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amazon Price Channel

General Dynamics and Amazon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with General Dynamics and Amazon

The main advantage of trading using opposite General Dynamics and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Dynamics position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.
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The idea behind General Dynamics Corp and Amazon Inc 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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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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