Correlation Between GE Aerospace and Morningstar Alternatives
Can any of the company-specific risk be diversified away by investing in both GE Aerospace and Morningstar Alternatives 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 Morningstar Alternatives into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GE Aerospace and Morningstar Alternatives, you can compare the effects of market volatilities on GE Aerospace and Morningstar Alternatives 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 Morningstar Alternatives. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Aerospace and Morningstar Alternatives.
Diversification Opportunities for GE Aerospace and Morningstar Alternatives
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GE Aerospace and Morningstar is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Morningstar Alternatives in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morningstar Alternatives 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 Morningstar Alternatives. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morningstar Alternatives has no effect on the direction of GE Aerospace i.e., GE Aerospace and Morningstar Alternatives go up and down completely randomly.
Pair Corralation between GE Aerospace and Morningstar Alternatives
Allowing for the 90-day total investment horizon GE Aerospace is expected to under-perform the Morningstar Alternatives. In addition to that, GE Aerospace is 13.09 times more volatile than Morningstar Alternatives. It trades about -0.04 of its total potential returns per unit of risk. Morningstar Alternatives is currently generating about -0.12 per unit of volatility. If you would invest 1,065 in Morningstar Alternatives on August 24, 2024 and sell it today you would lose (3.00) from holding Morningstar Alternatives or give up 0.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
GE Aerospace vs. Morningstar Alternatives
Performance |
| Timeline |
| GE Aerospace |
| Morningstar Alternatives |
GE Aerospace and Morningstar Alternatives Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GE Aerospace and Morningstar Alternatives
The main advantage of trading using opposite GE Aerospace and Morningstar Alternatives positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace position performs unexpectedly, Morningstar Alternatives 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 Morningstar Alternatives will offset losses from the drop in Morningstar Alternatives' long position.| GE Aerospace vs. Illinois Tool Works | GE Aerospace vs. Dover | GE Aerospace vs. Cummins | GE Aerospace vs. Eaton PLC |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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