Correlation Between GE Aerospace and Franklin Templeton
Can any of the company-specific risk be diversified away by investing in both GE Aerospace and Franklin Templeton 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 Franklin Templeton into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GE Aerospace and Franklin Templeton ETF, you can compare the effects of market volatilities on GE Aerospace and Franklin Templeton 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 Franklin Templeton. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Aerospace and Franklin Templeton.
Diversification Opportunities for GE Aerospace and Franklin Templeton
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GE Aerospace and Franklin is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Franklin Templeton ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Templeton ETF 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 Franklin Templeton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Templeton ETF has no effect on the direction of GE Aerospace i.e., GE Aerospace and Franklin Templeton go up and down completely randomly.
Pair Corralation between GE Aerospace and Franklin Templeton
Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 1.87 times more return on investment than Franklin Templeton. However, GE Aerospace is 1.87 times more volatile than Franklin Templeton ETF. It trades about 0.13 of its potential returns per unit of risk. Franklin Templeton ETF is currently generating about 0.06 per unit of risk. If you would invest 8,250 in GE Aerospace on August 27, 2024 and sell it today you would earn a total of 9,865 from holding GE Aerospace or generate 119.58% 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. Franklin Templeton ETF
Performance |
| Timeline |
| GE Aerospace |
| Franklin Templeton ETF |
GE Aerospace and Franklin Templeton Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GE Aerospace and Franklin Templeton
The main advantage of trading using opposite GE Aerospace and Franklin Templeton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace position performs unexpectedly, Franklin Templeton 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 Franklin Templeton will offset losses from the drop in Franklin Templeton'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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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