Correlation Between GE Aerospace and CEA Industries
Can any of the company-specific risk be diversified away by investing in both GE Aerospace and CEA Industries 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 CEA Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GE Aerospace and CEA Industries, you can compare the effects of market volatilities on GE Aerospace and CEA Industries 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 CEA Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Aerospace and CEA Industries.
Diversification Opportunities for GE Aerospace and CEA Industries
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GE Aerospace and CEA is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and CEA Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEA Industries 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 CEA Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEA Industries has no effect on the direction of GE Aerospace i.e., GE Aerospace and CEA Industries go up and down completely randomly.
Pair Corralation between GE Aerospace and CEA Industries
Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 0.49 times more return on investment than CEA Industries. However, GE Aerospace is 2.06 times less risky than CEA Industries. It trades about 0.54 of its potential returns per unit of risk. CEA Industries is currently generating about 0.0 per unit of risk. If you would invest 16,859 in GE Aerospace on November 2, 2024 and sell it today you would earn a total of 3,698 from holding GE Aerospace or generate 21.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GE Aerospace vs. CEA Industries
Performance |
| Timeline |
| GE Aerospace |
| CEA Industries |
GE Aerospace and CEA Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GE Aerospace and CEA Industries
The main advantage of trading using opposite GE Aerospace and CEA Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace position performs unexpectedly, CEA Industries 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 CEA Industries will offset losses from the drop in CEA Industries' long position.| GE Aerospace vs. Illinois Tool Works | GE Aerospace vs. Dover | GE Aerospace vs. Cummins | GE Aerospace vs. Eaton PLC |
| CEA Industries vs. Rev Group | CEA Industries vs. Caterpillar | CEA Industries vs. Buhler Industries | CEA Industries vs. Austin Engineering Limited |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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