Correlation Between GE Aerospace and AAR Corp
Can any of the company-specific risk be diversified away by investing in both GE Aerospace and AAR Corp 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 AAR Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GE Aerospace and AAR Corp, you can compare the effects of market volatilities on GE Aerospace and AAR Corp 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 AAR Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Aerospace and AAR Corp.
Diversification Opportunities for GE Aerospace and AAR Corp
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GE Aerospace and AAR is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and AAR Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAR Corp 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 AAR Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAR Corp has no effect on the direction of GE Aerospace i.e., GE Aerospace and AAR Corp go up and down completely randomly.
Pair Corralation between GE Aerospace and AAR Corp
Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 1.52 times more return on investment than AAR Corp. However, GE Aerospace is 1.52 times more volatile than AAR Corp. It trades about 0.45 of its potential returns per unit of risk. AAR Corp is currently generating about 0.06 per unit of risk. If you would invest 17,289 in GE Aerospace on November 9, 2024 and sell it today you would earn a total of 3,317 from holding GE Aerospace or generate 19.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GE Aerospace vs. AAR Corp
Performance |
| Timeline |
| GE Aerospace |
| AAR Corp |
GE Aerospace and AAR Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GE Aerospace and AAR Corp
The main advantage of trading using opposite GE Aerospace and AAR Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace position performs unexpectedly, AAR Corp 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 AAR Corp will offset losses from the drop in AAR Corp's long position.| GE Aerospace vs. Great Western Minerals | GE Aerospace vs. Enterprise Bancorp | GE Aerospace vs. T Rowe Price | GE Aerospace vs. Aviat Networks |
| AAR Corp vs. Curtiss Wright | AAR Corp vs. Hexcel | AAR Corp vs. Moog Inc | AAR Corp vs. Ducommun Incorporated |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
Other Complementary Tools
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges |