Correlation Between General Dynamics and SBC Medical

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

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

Diversification Opportunities for General Dynamics and SBC Medical

-0.35

Correlation Coefficient

General Dynamics  SBC Medical

Very good diversification

The 3 months correlation between General and SBC is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding General Dynamics and SBC Medical Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBC Medical Group 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 SBC Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBC Medical Group has no effect on the direction of General Dynamics i.e., General Dynamics and SBC Medical go up and down completely randomly.

Pair Corralation between General Dynamics and SBC Medical

Allowing for the 90-day total investment horizon General Dynamics is expected to generate 65.73 times less return on investment than SBC Medical. But when comparing it to its historical volatility, General Dynamics is 12.79 times less risky than SBC Medical. It trades about 0.05 of its potential returns per unit of risk. SBC Medical Group is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  7.31  in SBC Medical Group on September 4, 2024 and sell it today you would earn a total of  21.69  from holding SBC Medical Group or generate 296.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	22.27%
Values	Daily Returns

General Dynamics  vs.  SBC Medical Group

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

SBC Medical Group

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SBC Medical Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SBC Medical showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with General Dynamics and SBC Medical

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

The idea behind General Dynamics and SBC Medical Group 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.