Correlation Between IMPERIAL TOBACCO and General Dynamics

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

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

Diversification Opportunities for IMPERIAL TOBACCO and General Dynamics

-0.35

Correlation Coefficient

IMPERIAL TOBACCO  General Dynamics

Very good diversification

The 3 months correlation between IMPERIAL and General is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO 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 IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and General Dynamics go up and down completely randomly.

Pair Corralation between IMPERIAL TOBACCO and General Dynamics

Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to under-perform the General Dynamics. In addition to that, IMPERIAL TOBACCO is 1.13 times more volatile than General Dynamics. It trades about -0.01 of its total potential returns per unit of risk. General Dynamics is currently generating about 0.12 per unit of volatility. If you would invest  23,699  in General Dynamics on April 21, 2025 and sell it today you would earn a total of  2,321  from holding General Dynamics or generate 9.79% return on investment over 90 days.

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

IMPERIAL TOBACCO   vs.  General Dynamics

IMPERIAL TOBACCO

Risk-Adjusted Performance

Very Weak

Over the last 90 days IMPERIAL TOBACCO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, IMPERIAL TOBACCO is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

General Dynamics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Dynamics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, General Dynamics may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with IMPERIAL TOBACCO and General Dynamics

The main advantage of trading using opposite IMPERIAL TOBACCO and General Dynamics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IMPERIAL TOBACCO 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 IMPERIAL TOBACCO 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.