Correlation Between General Dynamics and Aerovironment

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both General Dynamics and Aerovironment 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 Aerovironment 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 Aerovironment, you can compare the effects of market volatilities on General Dynamics and Aerovironment 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 Aerovironment. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Dynamics and Aerovironment.

Diversification Opportunities for General Dynamics and Aerovironment

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between General and Aerovironment is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding General Dynamics Corp and Aerovironment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerovironment 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 Aerovironment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerovironment has no effect on the direction of General Dynamics i.e., General Dynamics and Aerovironment go up and down completely randomly.

Pair Corralation between General Dynamics and Aerovironment

Allowing for the 90-day total investment horizon General Dynamics is expected to generate 1.22 times less return on investment than Aerovironment. But when comparing it to its historical volatility, General Dynamics Corp is 2.65 times less risky than Aerovironment. It trades about 0.08 of its potential returns per unit of risk. Aerovironment is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,355  in Aerovironment on June 27, 2022 and sell it today you would earn a total of  2,510  from holding Aerovironment or generate 39.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy99.8%
ValuesDaily Returns

General Dynamics Corp  vs.  Aerovironment

 Performance (%) 
       Timeline  
General Dynamics Corp 
General Performance
0 of 100
Over the last 90 days General Dynamics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, General Dynamics is not utilizing all of its potentials. The new stock price tumult, may contribute to shorter-term losses for the shareholders.

General Price Channel

Aerovironment 
Aerovironment Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Aerovironment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly sluggish basic indicators, Aerovironment may actually be approaching a critical reversion point that can send shares even higher in October 2022.

Aerovironment Price Channel

General Dynamics and Aerovironment Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with General Dynamics and Aerovironment

The main advantage of trading using opposite General Dynamics and Aerovironment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Dynamics position performs unexpectedly, Aerovironment 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 Aerovironment will offset losses from the drop in Aerovironment's long position.
General Dynamics vs. Sigma Lithium Corp
The idea behind General Dynamics Corp and Aerovironment 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.
Aerovironment vs. Sigma Lithium Corp
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 Bond Directory module to find actively traded corporate debentures issued by US companies.

Other Complementary Tools

Portfolio Manager
State of the art Portfolio Manager to monitor and improve performance of your invested capital
Go
Equity Valuation
Check real value of public entities based on technical and fundamental data
Go
Portfolio Center
All portfolio management and optimization tools to improve performance of your portfolios
Go
Volatility Analysis
Get historical volatility and risk analysis based on latest market data
Go
Theme Ratings
Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance
Go
Portfolio Backtesting
Avoid under-diversification and over-optimization by backtesting your portfolios
Go
Positions Ratings
Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance
Go
Transaction History
View history of all your transactions and understand their impact on performance
Go
Money Flow Index
Determine momentum by analyzing Money Flow Index and other technical indicators
Go
Money Managers
Screen money managers from public funds and ETFs managed around the world
Go