Correlation Between Ehang Holdings and General Dynamics

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

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

Diversification Opportunities for Ehang Holdings and General Dynamics

0.88

Correlation Coefficient

Ehang Holdings  General Dynamics

Very poor diversification

The 3 months correlation between Ehang and General is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Ehang Holdings and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics and Ehang Holdings 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 Ehang Holdings 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 Ehang Holdings i.e., Ehang Holdings and General Dynamics go up and down completely randomly.

Pair Corralation between Ehang Holdings and General Dynamics

Allowing for the 90-day total investment horizon Ehang Holdings is expected to under-perform the General Dynamics. In addition to that, Ehang Holdings is 4.35 times more volatile than General Dynamics. It trades about -0.08 of its total potential returns per unit of risk. General Dynamics is currently generating about -0.08 per unit of volatility. If you would invest  29,012  in General Dynamics on January 30, 2024 and sell it today you would lose (571.00) from holding General Dynamics or give up 1.97% of portfolio value over 90 days.

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

Ehang Holdings  vs.  General Dynamics

Ehang Holdings

Risk-Adjusted Performance

13 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ehang Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Ehang Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

General Dynamics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Dynamics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, General Dynamics may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Ehang Holdings and General Dynamics

The main advantage of trading using opposite Ehang Holdings and General Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ehang Holdings 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 Ehang Holdings 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.