Correlation Between GE Aerospace and RiverFront Dynamic

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

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

Diversification Opportunities for GE Aerospace and RiverFront Dynamic

0.74

Correlation Coefficient

GE Aerospace  RiverFront Dynamic

Poor diversification

The 3 months correlation between GE Aerospace and RiverFront is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and RiverFront Dynamic Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RiverFront Dynamic Core 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 RiverFront Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RiverFront Dynamic Core has no effect on the direction of GE Aerospace i.e., GE Aerospace and RiverFront Dynamic go up and down completely randomly.

Pair Corralation between GE Aerospace and RiverFront Dynamic

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 5.98 times more return on investment than RiverFront Dynamic. However, GE Aerospace is 5.98 times more volatile than RiverFront Dynamic Core. It trades about 0.3 of its potential returns per unit of risk. RiverFront Dynamic Core is currently generating about 0.17 per unit of risk. If you would invest  20,830  in GE Aerospace on May 6, 2025 and sell it today you would earn a total of  6,108  from holding GE Aerospace or generate 29.32% 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.  RiverFront Dynamic Core

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.

RiverFront Dynamic Core

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RiverFront Dynamic Core are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, RiverFront Dynamic is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with GE Aerospace and RiverFront Dynamic

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

The idea behind GE Aerospace and RiverFront Dynamic Core 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.