Correlation Between General Dynamics and Ducommun

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

Diversification Opportunities for General Dynamics and Ducommun

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between General and Ducommun is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding General Dynamics Corp and Ducommun in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ducommun 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 Ducommun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ducommun has no effect on the direction of General Dynamics i.e., General Dynamics and Ducommun go up and down completely randomly.

Pair Corralation between General Dynamics and Ducommun

Allowing for the 90-day total investment horizon General Dynamics Corp is expected to generate 0.8 times more return on investment than Ducommun. However, General Dynamics Corp is 1.25 times less risky than Ducommun. It trades about 0.0 of its potential returns per unit of risk. Ducommun is currently generating about -0.02 per unit of risk. If you would invest  22,455  in General Dynamics Corp on July 8, 2022 and sell it today you would lose (81.00)  from holding General Dynamics Corp or give up 0.36% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

General Dynamics Corp  vs.  Ducommun

 Performance (%) 
       Timeline  
General Dynamics Corp 
General Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in General Dynamics Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, General Dynamics is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

General Price Channel

Ducommun 
Ducommun Performance
0 of 100
Over the last 90 days Ducommun has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Ducommun is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Ducommun Price Channel

General Dynamics and Ducommun Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with General Dynamics and Ducommun

The main advantage of trading using opposite General Dynamics and Ducommun positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Dynamics position performs unexpectedly, Ducommun 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 Ducommun will offset losses from the drop in Ducommun's long position.
General Dynamics vs. Amazon Inc
The idea behind General Dynamics Corp and Ducommun 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.
Ducommun vs. Amazon Inc
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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