Correlation Between Lilium NV and General Dynamics

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

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

Diversification Opportunities for Lilium NV and General Dynamics

0.49

Correlation Coefficient

Lilium NV  General Dynamics

Very weak diversification

The 3 months correlation between Lilium and General is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Lilium NV and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics and Lilium NV 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 Lilium NV are associated (or correlated) with General Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Dynamics has no effect on the direction of Lilium NV i.e., Lilium NV and General Dynamics go up and down completely randomly.

Pair Corralation between Lilium NV and General Dynamics

Given the investment horizon of 90 days Lilium NV is expected to under-perform the General Dynamics. In addition to that, Lilium NV is 14.76 times more volatile than General Dynamics. It trades about -0.03 of its total potential returns per unit of risk. General Dynamics is currently generating about -0.15 per unit of volatility. If you would invest  30,334  in General Dynamics on September 13, 2024 and sell it today you would lose (3,791) from holding General Dynamics or give up 12.5% of portfolio value over 90 days.

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

Lilium NV  vs.  General Dynamics

Lilium NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lilium NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Lilium NV and General Dynamics

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

The idea behind Lilium NV and General Dynamics 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..