Correlation Between GE Aerospace and Armada Mercantile
Can any of the company-specific risk be diversified away by investing in both GE Aerospace and Armada Mercantile 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 Armada Mercantile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GE Aerospace and Armada Mercantile, you can compare the effects of market volatilities on GE Aerospace and Armada Mercantile 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 Armada Mercantile. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Aerospace and Armada Mercantile.
Diversification Opportunities for GE Aerospace and Armada Mercantile
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GE Aerospace and Armada is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Armada Mercantile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Armada Mercantile 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 Armada Mercantile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Armada Mercantile has no effect on the direction of GE Aerospace i.e., GE Aerospace and Armada Mercantile go up and down completely randomly.
Pair Corralation between GE Aerospace and Armada Mercantile
Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 15.73 times less return on investment than Armada Mercantile. But when comparing it to its historical volatility, GE Aerospace is 10.06 times less risky than Armada Mercantile. It trades about 0.08 of its potential returns per unit of risk. Armada Mercantile is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 20.00 in Armada Mercantile on November 27, 2024 and sell it today you would earn a total of 4.00 from holding Armada Mercantile or generate 20.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
GE Aerospace vs. Armada Mercantile
Performance |
| Timeline |
| GE Aerospace |
| Armada Mercantile |
GE Aerospace and Armada Mercantile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GE Aerospace and Armada Mercantile
The main advantage of trading using opposite GE Aerospace and Armada Mercantile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace position performs unexpectedly, Armada Mercantile 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 Armada Mercantile will offset losses from the drop in Armada Mercantile's long position.| GE Aerospace vs. Illinois Tool Works | GE Aerospace vs. Dover | GE Aerospace vs. Cummins | GE Aerospace vs. Eaton PLC |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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