Correlation Between GE Aerospace and Capital Group
Can any of the company-specific risk be diversified away by investing in both GE Aerospace and Capital Group 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 Capital Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GE Aerospace and Capital Group Multi Sector, you can compare the effects of market volatilities on GE Aerospace and Capital Group 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 Capital Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Aerospace and Capital Group.
Diversification Opportunities for GE Aerospace and Capital Group
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GE Aerospace and Capital is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Capital Group Multi Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Multi 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 Capital Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Group Multi has no effect on the direction of GE Aerospace i.e., GE Aerospace and Capital Group go up and down completely randomly.
Pair Corralation between GE Aerospace and Capital Group
Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 8.68 times more return on investment than Capital Group. However, GE Aerospace is 8.68 times more volatile than Capital Group Multi Sector. It trades about 0.34 of its potential returns per unit of risk. Capital Group Multi Sector is currently generating about 0.23 per unit of risk. If you would invest 18,285 in GE Aerospace on November 18, 2024 and sell it today you would earn a total of 2,542 from holding GE Aerospace or generate 13.9% 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. Capital Group Multi Sector
Performance |
| Timeline |
| GE Aerospace |
| Capital Group Multi |
GE Aerospace and Capital Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GE Aerospace and Capital Group
The main advantage of trading using opposite GE Aerospace and Capital Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace position performs unexpectedly, Capital Group 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 Capital Group will offset losses from the drop in Capital Group's long position.| GE Aerospace vs. Illinois Tool Works | GE Aerospace vs. Dover | GE Aerospace vs. Cummins | GE Aerospace vs. Eaton PLC |
| Capital Group vs. Capital Group Short | Capital Group vs. Capital Group Municipal | Capital Group vs. Capital Group Global | Capital Group vs. Capital Group Dividend |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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