Correlation Between GE Aerospace and ATT
Can any of the company-specific risk be diversified away by investing in both GE Aerospace and ATT 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 ATT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GE Aerospace and ATT Inc, you can compare the effects of market volatilities on GE Aerospace and ATT 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 ATT. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Aerospace and ATT.
Diversification Opportunities for GE Aerospace and ATT
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GE Aerospace and ATT is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc 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 ATT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATT Inc has no effect on the direction of GE Aerospace i.e., GE Aerospace and ATT go up and down completely randomly.
Pair Corralation between GE Aerospace and ATT
Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 1.15 times more return on investment than ATT. However, GE Aerospace is 1.15 times more volatile than ATT Inc. It trades about 0.15 of its potential returns per unit of risk. ATT Inc is currently generating about 0.05 per unit of risk. If you would invest 5,228 in GE Aerospace on August 24, 2024 and sell it today you would earn a total of 12,887 from holding GE Aerospace or generate 246.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GE Aerospace vs. ATT Inc
Performance |
| Timeline |
| GE Aerospace |
| ATT Inc |
GE Aerospace and ATT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GE Aerospace and ATT
The main advantage of trading using opposite GE Aerospace and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace position performs unexpectedly, ATT 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 ATT will offset losses from the drop in ATT's 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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