Correlation Between Atlas Copco and GE Aerospace
Can any of the company-specific risk be diversified away by investing in both Atlas Copco and GE Aerospace 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 Atlas Copco and GE Aerospace into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Atlas Copco AB and GE Aerospace, you can compare the effects of market volatilities on Atlas Copco and GE Aerospace 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 Atlas Copco with a short position of GE Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atlas Copco and GE Aerospace.
Diversification Opportunities for Atlas Copco and GE Aerospace
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Atlas and GE Aerospace is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Atlas Copco AB and GE Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE Aerospace and Atlas Copco 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 Atlas Copco AB are associated (or correlated) with GE Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE Aerospace has no effect on the direction of Atlas Copco i.e., Atlas Copco and GE Aerospace go up and down completely randomly.
Pair Corralation between Atlas Copco and GE Aerospace
Assuming the 90 days horizon Atlas Copco is expected to generate 2.12 times less return on investment than GE Aerospace. But when comparing it to its historical volatility, Atlas Copco AB is 1.54 times less risky than GE Aerospace. It trades about 0.22 of its potential returns per unit of risk. GE Aerospace is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 16,810 in GE Aerospace on November 30, 2024 and sell it today you would earn a total of 3,888 from holding GE Aerospace or generate 23.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Atlas Copco AB vs. GE Aerospace
Performance |
| Timeline |
| Atlas Copco AB |
| GE Aerospace |
Atlas Copco and GE Aerospace Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Atlas Copco and GE Aerospace
The main advantage of trading using opposite Atlas Copco and GE Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atlas Copco position performs unexpectedly, GE Aerospace 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 GE Aerospace will offset losses from the drop in GE Aerospace's long position.| Atlas Copco vs. Amaero International | Atlas Copco vs. Arista Power | Atlas Copco vs. Alfa Laval AB | Atlas Copco vs. American Commerce Solutions |
| GE Aerospace vs. Illinois Tool Works | GE Aerospace vs. Dover | GE Aerospace vs. Cummins | GE Aerospace vs. Eaton PLC |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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