Correlation Between GE Aerospace and Longleaf Partners

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

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

Diversification Opportunities for GE Aerospace and Longleaf Partners

0.68

Correlation Coefficient

GE Aerospace  Longleaf Partners

Poor diversification

The 3 months correlation between GE Aerospace and Longleaf is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Longleaf Partners Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longleaf Partners 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 Longleaf Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longleaf Partners has no effect on the direction of GE Aerospace i.e., GE Aerospace and Longleaf Partners go up and down completely randomly.

Pair Corralation between GE Aerospace and Longleaf Partners

Allowing for the 90-day total investment horizon GE Aerospace is expected to under-perform the Longleaf Partners. In addition to that, GE Aerospace is 3.6 times more volatile than Longleaf Partners Fund. It trades about -0.16 of its total potential returns per unit of risk. Longleaf Partners Fund is currently generating about -0.02 per unit of volatility. If you would invest  2,532  in Longleaf Partners Fund on August 20, 2024 and sell it today you would lose (9.00) from holding Longleaf Partners Fund or give up 0.36% of portfolio value over 90 days.

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

GE Aerospace  vs.  Longleaf Partners Fund

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.

Longleaf Partners

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Longleaf Partners Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Longleaf Partners is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GE Aerospace and Longleaf Partners

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

The idea behind GE Aerospace and Longleaf Partners Fund 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.