Correlation Between General Dynamics and Vicor

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

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

Diversification Opportunities for General Dynamics and Vicor

-0.4

Correlation Coefficient

General Dynamics  Vicor

Very good diversification

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

Pair Corralation between General Dynamics and Vicor

Allowing for the 90-day total investment horizon General Dynamics is expected to generate 0.28 times more return on investment than Vicor. However, General Dynamics is 3.55 times less risky than Vicor. It trades about -0.23 of its potential returns per unit of risk. Vicor is currently generating about -0.23 per unit of risk. If you would invest  27,644  in General Dynamics on October 1, 2024 and sell it today you would lose (1,030) from holding General Dynamics or give up 3.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

General Dynamics  vs.  Vicor

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 latest uncertain performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Vicor

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vicor are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental indicators, Vicor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with General Dynamics and Vicor

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

The idea behind General Dynamics and Vicor 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.