Correlation Between GE Aerospace and MicroSectors FANG
Can any of the company-specific risk be diversified away by investing in both GE Aerospace and MicroSectors FANG 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 MicroSectors FANG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GE Aerospace and MicroSectors FANG Index, you can compare the effects of market volatilities on GE Aerospace and MicroSectors FANG 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 MicroSectors FANG. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Aerospace and MicroSectors FANG.
Diversification Opportunities for GE Aerospace and MicroSectors FANG
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GE Aerospace and MicroSectors is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and MicroSectors FANG Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors FANG Index 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 MicroSectors FANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors FANG Index has no effect on the direction of GE Aerospace i.e., GE Aerospace and MicroSectors FANG go up and down completely randomly.
Pair Corralation between GE Aerospace and MicroSectors FANG
Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 0.63 times more return on investment than MicroSectors FANG. However, GE Aerospace is 1.58 times less risky than MicroSectors FANG. It trades about 0.13 of its potential returns per unit of risk. MicroSectors FANG Index is currently generating about 0.08 per unit of risk. If you would invest 11,043 in GE Aerospace on November 5, 2024 and sell it today you would earn a total of 9,368 from holding GE Aerospace or generate 84.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GE Aerospace vs. MicroSectors FANG Index
Performance |
| Timeline |
| GE Aerospace |
| MicroSectors FANG Index |
GE Aerospace and MicroSectors FANG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GE Aerospace and MicroSectors FANG
The main advantage of trading using opposite GE Aerospace and MicroSectors FANG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace position performs unexpectedly, MicroSectors FANG 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 MicroSectors FANG will offset losses from the drop in MicroSectors FANG's long position.| GE Aerospace vs. Illinois Tool Works | GE Aerospace vs. Dover | GE Aerospace vs. Cummins | GE Aerospace vs. Eaton PLC |
| MicroSectors FANG vs. MicroSectors FANG ETN | MicroSectors FANG vs. Direxion Daily Dow | MicroSectors FANG vs. MicroSectors FANG Index | MicroSectors FANG vs. Direxion Daily Cnsmr |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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