Correlation Between GE Aerospace and Prosus
Can any of the company-specific risk be diversified away by investing in both GE Aerospace and Prosus 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 Prosus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GE Aerospace and Prosus, you can compare the effects of market volatilities on GE Aerospace and Prosus 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 Prosus. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Aerospace and Prosus.
Diversification Opportunities for GE Aerospace and Prosus
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GE Aerospace and Prosus is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Prosus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosus 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 Prosus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosus has no effect on the direction of GE Aerospace i.e., GE Aerospace and Prosus go up and down completely randomly.
Pair Corralation between GE Aerospace and Prosus
Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 0.99 times more return on investment than Prosus. However, GE Aerospace is 1.01 times less risky than Prosus. It trades about 0.09 of its potential returns per unit of risk. Prosus is currently generating about 0.08 per unit of risk. If you would invest 16,397 in GE Aerospace on August 31, 2024 and sell it today you would earn a total of 1,663 from holding GE Aerospace or generate 10.14% 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. Prosus
Performance |
| Timeline |
| GE Aerospace |
| Prosus |
GE Aerospace and Prosus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GE Aerospace and Prosus
The main advantage of trading using opposite GE Aerospace and Prosus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace position performs unexpectedly, Prosus 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 Prosus will offset losses from the drop in Prosus' long position.| GE Aerospace vs. Illinois Tool Works | GE Aerospace vs. Dover | GE Aerospace vs. Cummins | GE Aerospace vs. Eaton PLC |
| Prosus vs. Tencent Holdings | Prosus vs. Autohome | Prosus vs. Arena Group Holdings | Prosus vs. Golden Grail Technology |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities |