Correlation Between General Dynamics and Raytheon Technologies

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

By analyzing existing cross correlation between General Dynamics and Raytheon Technologies Corp, you can compare the effects of market volatilities on General Dynamics and Raytheon Technologies 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 Raytheon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Dynamics and Raytheon Technologies.

Diversification Opportunities for General Dynamics and Raytheon Technologies

0.4

Correlation Coefficient

General Dynamics  Raytheon Technologies

Very weak diversification

The 3 months correlation between General and Raytheon is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding General Dynamics and Raytheon Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies 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 are associated (or correlated) with Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of General Dynamics i.e., General Dynamics and Raytheon Technologies go up and down completely randomly.

Pair Corralation between General Dynamics and Raytheon Technologies

Allowing for the 90-day total investment horizon General Dynamics is expected to under-perform the Raytheon Technologies. In addition to that, General Dynamics is 1.21 times more volatile than Raytheon Technologies Corp. It trades about -0.03 of its total potential returns per unit of risk. Raytheon Technologies Corp is currently generating about 0.02 per unit of volatility. If you would invest  12,035  in Raytheon Technologies Corp on September 2, 2024 and sell it today you would earn a total of  148.00  from holding Raytheon Technologies Corp or generate 1.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

General Dynamics  vs.  Raytheon Technologies Corp

General Dynamics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General Dynamics 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Raytheon Technologies

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Raytheon Technologies Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Raytheon Technologies is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with General Dynamics and Raytheon Technologies

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

The idea behind General Dynamics and Raytheon Technologies Corp 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.