Correlation Between GE Aerospace and Kronos Advanced
Can any of the company-specific risk be diversified away by investing in both GE Aerospace and Kronos Advanced 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 Kronos Advanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GE Aerospace and Kronos Advanced Technologies, you can compare the effects of market volatilities on GE Aerospace and Kronos Advanced 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 Kronos Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Aerospace and Kronos Advanced.
Diversification Opportunities for GE Aerospace and Kronos Advanced
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GE Aerospace and Kronos is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Kronos Advanced Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kronos Advanced Tech 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 Kronos Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kronos Advanced Tech has no effect on the direction of GE Aerospace i.e., GE Aerospace and Kronos Advanced go up and down completely randomly.
Pair Corralation between GE Aerospace and Kronos Advanced
Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 5.78 times less return on investment than Kronos Advanced. But when comparing it to its historical volatility, GE Aerospace is 8.71 times less risky than Kronos Advanced. It trades about 0.15 of its potential returns per unit of risk. Kronos Advanced Technologies is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 0.37 in Kronos Advanced Technologies on August 26, 2024 and sell it today you would earn a total of 0.43 from holding Kronos Advanced Technologies or generate 116.22% 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. Kronos Advanced Technologies
Performance |
| Timeline |
| GE Aerospace |
| Kronos Advanced Tech |
GE Aerospace and Kronos Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GE Aerospace and Kronos Advanced
The main advantage of trading using opposite GE Aerospace and Kronos Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace position performs unexpectedly, Kronos Advanced 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 Kronos Advanced will offset losses from the drop in Kronos Advanced'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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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