Correlation Between Eve Holding and GE Aerospace

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

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

Diversification Opportunities for Eve Holding and GE Aerospace

-0.76

Correlation Coefficient

Eve Holding  GE Aerospace

Pay attention - limited upside

The 3 months correlation between Eve and GE Aerospace is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Eve Holding and GE Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE Aerospace and Eve Holding 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 Eve Holding are associated (or correlated) with GE Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE Aerospace has no effect on the direction of Eve Holding i.e., Eve Holding and GE Aerospace go up and down completely randomly.

Pair Corralation between Eve Holding and GE Aerospace

Given the investment horizon of 90 days Eve Holding is expected to under-perform the GE Aerospace. In addition to that, Eve Holding is 1.79 times more volatile than GE Aerospace. It trades about -0.07 of its total potential returns per unit of risk. GE Aerospace is currently generating about 0.3 per unit of volatility. If you would invest  8,893  in GE Aerospace on February 2, 2024 and sell it today you would earn a total of  7,371  from holding GE Aerospace or generate 82.89% return on investment over 90 days.

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

Eve Holding  vs.  GE Aerospace

Eve Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eve Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

GE Aerospace

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, GE Aerospace exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eve Holding and GE Aerospace

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

The idea behind Eve Holding and GE Aerospace 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.

Check out your portfolio center.

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.