Correlation Between GE Aerospace and Capstone Companies

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

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

Diversification Opportunities for GE Aerospace and Capstone Companies

0.79

Correlation Coefficient

GE Aerospace  Capstone Companies

Poor diversification

The 3 months correlation between GE Aerospace and Capstone is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Capstone Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capstone Companies 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 Capstone Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capstone Companies has no effect on the direction of GE Aerospace i.e., GE Aerospace and Capstone Companies go up and down completely randomly.

Pair Corralation between GE Aerospace and Capstone Companies

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 7.28 times less return on investment than Capstone Companies. But when comparing it to its historical volatility, GE Aerospace is 14.93 times less risky than Capstone Companies. It trades about 0.3 of its potential returns per unit of risk. Capstone Companies is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1.90  in Capstone Companies on May 6, 2025 and sell it today you would earn a total of  1.50  from holding Capstone Companies or generate 78.95% return on investment over 90 days.

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

GE Aerospace  vs.  Capstone Companies

GE Aerospace

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 23 (%) 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.

Capstone Companies

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capstone Companies are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Capstone Companies exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GE Aerospace and Capstone Companies

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

The idea behind GE Aerospace and Capstone Companies 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.