Correlation Between GE Aerospace and Continental
Can any of the company-specific risk be diversified away by investing in both GE Aerospace and Continental 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 GE Aerospace and Continental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GE Aerospace and Continental AG PK, you can compare the effects of market volatilities on GE Aerospace and Continental 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 GE Aerospace with a short position of Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Aerospace and Continental.
Diversification Opportunities for GE Aerospace and Continental
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GE Aerospace and Continental is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Continental AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental AG PK and GE Aerospace 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 GE Aerospace are associated (or correlated) with Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental AG PK has no effect on the direction of GE Aerospace i.e., GE Aerospace and Continental go up and down completely randomly.
Pair Corralation between GE Aerospace and Continental
Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 2.04 times more return on investment than Continental. However, GE Aerospace is 2.04 times more volatile than Continental AG PK. It trades about 0.25 of its potential returns per unit of risk. Continental AG PK is currently generating about -0.25 per unit of risk. If you would invest 13,961 in GE Aerospace on January 30, 2024 and sell it today you would earn a total of 2,274 from holding GE Aerospace or generate 16.29% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 95.45% |
Values | Daily Returns |
GE Aerospace vs. Continental AG PK
Performance |
Timeline |
GE Aerospace |
Continental AG PK |
GE Aerospace and Continental Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GE Aerospace and Continental
The main advantage of trading using opposite GE Aerospace and Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace position performs unexpectedly, Continental 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 Continental will offset losses from the drop in Continental's long position.GE Aerospace vs. Illinois Tool Works | GE Aerospace vs. Dover | GE Aerospace vs. Cummins | GE Aerospace vs. Eaton PLC |
Continental vs. Compagnie Gnrale des | Continental vs. Bridgestone Corp ADR | Continental vs. Continental Aktiengesellschaft | Continental vs. Douglas Dynamics |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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