Correlation Between GE Aerospace and Class 1
Can any of the company-specific risk be diversified away by investing in both GE Aerospace and Class 1 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 Class 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GE Aerospace and Class 1 Nickel, you can compare the effects of market volatilities on GE Aerospace and Class 1 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 Class 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Aerospace and Class 1.
Diversification Opportunities for GE Aerospace and Class 1
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between GE Aerospace and Class is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Class 1 Nickel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Class 1 Nickel 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 Class 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Class 1 Nickel has no effect on the direction of GE Aerospace i.e., GE Aerospace and Class 1 go up and down completely randomly.
Pair Corralation between GE Aerospace and Class 1
Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 13.99 times less return on investment than Class 1. But when comparing it to its historical volatility, GE Aerospace is 9.54 times less risky than Class 1. It trades about 0.1 of its potential returns per unit of risk. Class 1 Nickel is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 9.40 in Class 1 Nickel on September 3, 2024 and sell it today you would earn a total of 8.60 from holding Class 1 Nickel or generate 91.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 79.69% |
| Values | Daily Returns |
GE Aerospace vs. Class 1 Nickel
Performance |
| Timeline |
| GE Aerospace |
| Class 1 Nickel |
GE Aerospace and Class 1 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GE Aerospace and Class 1
The main advantage of trading using opposite GE Aerospace and Class 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace position performs unexpectedly, Class 1 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 Class 1 will offset losses from the drop in Class 1'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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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