Correlation Between GE Aerospace and Alternative Investment
Can any of the company-specific risk be diversified away by investing in both GE Aerospace and Alternative Investment 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 Alternative Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GE Aerospace and Alternative Investment, you can compare the effects of market volatilities on GE Aerospace and Alternative Investment 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 Alternative Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Aerospace and Alternative Investment.
Diversification Opportunities for GE Aerospace and Alternative Investment
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GE Aerospace and Alternative is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Alternative Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alternative Investment 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 Alternative Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alternative Investment has no effect on the direction of GE Aerospace i.e., GE Aerospace and Alternative Investment go up and down completely randomly.
Pair Corralation between GE Aerospace and Alternative Investment
Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 7.48 times less return on investment than Alternative Investment. But when comparing it to its historical volatility, GE Aerospace is 26.2 times less risky than Alternative Investment. It trades about 0.15 of its potential returns per unit of risk. Alternative Investment is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 0.01 in Alternative Investment on August 27, 2024 and sell it today you would earn a total of 187.99 from holding Alternative Investment or generate 1879900.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GE Aerospace vs. Alternative Investment
Performance |
| Timeline |
| GE Aerospace |
| Alternative Investment |
GE Aerospace and Alternative Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GE Aerospace and Alternative Investment
The main advantage of trading using opposite GE Aerospace and Alternative Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace position performs unexpectedly, Alternative Investment 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 Alternative Investment will offset losses from the drop in Alternative Investment's long position.| GE Aerospace vs. Illinois Tool Works | GE Aerospace vs. Dover | GE Aerospace vs. Cummins | GE Aerospace vs. Eaton PLC |
| Alternative Investment vs. Ascendant Resources | Alternative Investment vs. Cantex Mine Development | Alternative Investment vs. Amarc Resources | Alternative Investment vs. Sterling Metals Corp |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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