Correlation Between GE Aerospace and Embassy Bancorp

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

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

Diversification Opportunities for GE Aerospace and Embassy Bancorp

-0.94

Correlation Coefficient

GE Aerospace  Embassy Bancorp

Pay attention - limited upside

The 3 months correlation between GE Aerospace and Embassy is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Embassy Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embassy Bancorp 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 Embassy Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embassy Bancorp has no effect on the direction of GE Aerospace i.e., GE Aerospace and Embassy Bancorp go up and down completely randomly.

Pair Corralation between GE Aerospace and Embassy Bancorp

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 0.76 times more return on investment than Embassy Bancorp. However, GE Aerospace is 1.31 times less risky than Embassy Bancorp. It trades about 0.19 of its potential returns per unit of risk. Embassy Bancorp is currently generating about 0.02 per unit of risk. If you would invest  8,024  in GE Aerospace on February 3, 2024 and sell it today you would earn a total of  8,240  from holding GE Aerospace or generate 102.69% return on investment over 90 days.

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

GE Aerospace  vs.  Embassy Bancorp

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.

Embassy Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Embassy Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with GE Aerospace and Embassy Bancorp

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

The idea behind GE Aerospace and Embassy Bancorp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.