Correlation Between A O and General Electric
Can any of the company-specific risk be diversified away by investing in both A O and General Electric 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 A O and General Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between A O Smith and General Electric, you can compare the effects of market volatilities on A O and General Electric 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 A O with a short position of General Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of A O and General Electric.
Diversification Opportunities for A O and General Electric
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between AOS and General is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding A O Smith and General Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Electric and A O 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 A O Smith are associated (or correlated) with General Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Electric has no effect on the direction of A O i.e., A O and General Electric go up and down completely randomly.
Pair Corralation between A O and General Electric
Assuming the 90 days trading horizon A O is expected to generate 28.31 times less return on investment than General Electric. But when comparing it to its historical volatility, A O Smith is 15.78 times less risky than General Electric. It trades about 0.05 of its potential returns per unit of risk. General Electric is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 184,958 in General Electric on August 31, 2024 and sell it today you would earn a total of 197,042 from holding General Electric or generate 106.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
A O Smith vs. General Electric
Performance |
| Timeline |
| A O Smith |
| General Electric |
A O and General Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with A O and General Electric
The main advantage of trading using opposite A O and General Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if A O position performs unexpectedly, General Electric 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 General Electric will offset losses from the drop in General Electric's long position.| A O vs. Taiwan Semiconductor Manufacturing | A O vs. Southern Copper | A O vs. Samsung Electronics Co | A O vs. Grupo Sports World |
| General Electric vs. DXC Technology | General Electric vs. Cognizant Technology Solutions | General Electric vs. Grupo Sports World | General Electric vs. FibraHotel |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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