Correlation Between GE Aerospace and Amada

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

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

Diversification Opportunities for GE Aerospace and Amada

-0.33

Correlation Coefficient

GE Aerospace  Amada

Very good diversification

The 3 months correlation between GE Aerospace and Amada is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Amada Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amada 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 Amada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amada has no effect on the direction of GE Aerospace i.e., GE Aerospace and Amada go up and down completely randomly.

Pair Corralation between GE Aerospace and Amada

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 0.08 times more return on investment than Amada. However, GE Aerospace is 11.92 times less risky than Amada. It trades about -0.06 of its potential returns per unit of risk. Amada Co is currently generating about -0.16 per unit of risk. If you would invest  18,839  in GE Aerospace on August 23, 2024 and sell it today you would lose (1,041) from holding GE Aerospace or give up 5.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.73%
Values	Daily Returns

GE Aerospace  vs.  Amada Co

GE Aerospace

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, GE Aerospace is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Amada

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amada Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with GE Aerospace and Amada

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

The idea behind GE Aerospace and Amada Co 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.