Correlation Between GE Aerospace and Nova Lithium
Can any of the company-specific risk be diversified away by investing in both GE Aerospace and Nova Lithium 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 Nova Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GE Aerospace and Nova Lithium Corp, you can compare the effects of market volatilities on GE Aerospace and Nova Lithium 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 Nova Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Aerospace and Nova Lithium.
Diversification Opportunities for GE Aerospace and Nova Lithium
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GE Aerospace and Nova is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Nova Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Lithium Corp 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 Nova Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Lithium Corp has no effect on the direction of GE Aerospace i.e., GE Aerospace and Nova Lithium go up and down completely randomly.
Pair Corralation between GE Aerospace and Nova Lithium
Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 0.29 times more return on investment than Nova Lithium. However, GE Aerospace is 3.48 times less risky than Nova Lithium. It trades about 0.19 of its potential returns per unit of risk. Nova Lithium Corp is currently generating about -0.14 per unit of risk. If you would invest 17,176 in GE Aerospace on September 3, 2024 and sell it today you would earn a total of 1,040 from holding GE Aerospace or generate 6.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GE Aerospace vs. Nova Lithium Corp
Performance |
| Timeline |
| GE Aerospace |
| Nova Lithium Corp |
GE Aerospace and Nova Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GE Aerospace and Nova Lithium
The main advantage of trading using opposite GE Aerospace and Nova Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace position performs unexpectedly, Nova Lithium 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 Nova Lithium will offset losses from the drop in Nova Lithium'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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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