Correlation Between GE Aerospace and 42225UAK0

Can any of the company-specific risk be diversified away by investing in both GE Aerospace and 42225UAK0 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 42225UAK0 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GE Aerospace and HR 3625 15 JAN 28, you can compare the effects of market volatilities on GE Aerospace and 42225UAK0 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 42225UAK0. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Aerospace and 42225UAK0.

Diversification Opportunities for GE Aerospace and 42225UAK0

0.69

Correlation Coefficient

GE Aerospace  42225UAK0

Poor diversification

The 3 months correlation between GE Aerospace and 42225UAK0 is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and HR 3625 15 JAN 28 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HR 3625 15 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 42225UAK0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HR 3625 15 has no effect on the direction of GE Aerospace i.e., GE Aerospace and 42225UAK0 go up and down completely randomly.

Pair Corralation between GE Aerospace and 42225UAK0

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 2.0 times more return on investment than 42225UAK0. However, GE Aerospace is 2.0 times more volatile than HR 3625 15 JAN 28. It trades about 0.06 of its potential returns per unit of risk. HR 3625 15 JAN 28 is currently generating about -0.11 per unit of risk. If you would invest  16,956  in GE Aerospace on July 26, 2024 and sell it today you would earn a total of  1,018  from holding GE Aerospace or generate 6.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	64.06%
Values	Daily Returns

GE Aerospace  vs.  HR 3625 15 JAN 28

GE Aerospace

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, GE Aerospace may actually be approaching a critical reversion point that can send shares even higher in November 2024.

HR 3625 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HR 3625 15 JAN 28 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for HR 3625 15 JAN 28 investors.

Pair Trading with GE Aerospace and 42225UAK0

The main advantage of trading using opposite GE Aerospace and 42225UAK0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace position performs unexpectedly, 42225UAK0 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 42225UAK0 will offset losses from the drop in 42225UAK0's long position.

The idea behind GE Aerospace and HR 3625 15 JAN 28 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.