Correlation Between GE Aerospace and Ducommun Incorporated

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

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

Diversification Opportunities for GE Aerospace and Ducommun Incorporated

0.89

Correlation Coefficient

GE Aerospace  Ducommun Incorporated

Very poor diversification

The 3 months correlation between GE Aerospace and Ducommun is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Ducommun Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ducommun Incorporated 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 Ducommun Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ducommun Incorporated has no effect on the direction of GE Aerospace i.e., GE Aerospace and Ducommun Incorporated go up and down completely randomly.

Pair Corralation between GE Aerospace and Ducommun Incorporated

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 1.3 times less return on investment than Ducommun Incorporated. But when comparing it to its historical volatility, GE Aerospace is 1.12 times less risky than Ducommun Incorporated. It trades about 0.31 of its potential returns per unit of risk. Ducommun Incorporated is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  6,368  in Ducommun Incorporated on May 7, 2025 and sell it today you would earn a total of  2,749  from holding Ducommun Incorporated or generate 43.17% return on investment over 90 days.

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

GE Aerospace  vs.  Ducommun Incorporated

GE Aerospace

Risk-Adjusted Performance

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 uncertain technical and fundamental indicators, GE Aerospace exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ducommun Incorporated

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Ducommun Incorporated are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Ducommun Incorporated displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GE Aerospace and Ducommun Incorporated

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

The idea behind GE Aerospace and Ducommun Incorporated 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.