Correlation Between GE Aerospace and NORTHROP

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Can any of the company-specific risk be diversified away by investing in both GE Aerospace and NORTHROP 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 NORTHROP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GE Aerospace and NORTHROP GRUMMAN P, you can compare the effects of market volatilities on GE Aerospace and NORTHROP 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 NORTHROP. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Aerospace and NORTHROP.

Diversification Opportunities for GE Aerospace and NORTHROP

-0.08
  Correlation Coefficient

Good diversification

The 3 months correlation between GE Aerospace and NORTHROP is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and NORTHROP GRUMMAN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORTHROP GRUMMAN P 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 NORTHROP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORTHROP GRUMMAN P has no effect on the direction of GE Aerospace i.e., GE Aerospace and NORTHROP go up and down completely randomly.

Pair Corralation between GE Aerospace and NORTHROP

Allowing for the 90-day total investment horizon GE Aerospace is expected to under-perform the NORTHROP. In addition to that, GE Aerospace is 1.33 times more volatile than NORTHROP GRUMMAN P. It trades about -0.2 of its total potential returns per unit of risk. NORTHROP GRUMMAN P is currently generating about 0.26 per unit of volatility. If you would invest  10,360  in NORTHROP GRUMMAN P on September 12, 2024 and sell it today you would earn a total of  630.00  from holding NORTHROP GRUMMAN P or generate 6.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy85.71%
ValuesDaily Returns

GE Aerospace  vs.  NORTHROP GRUMMAN P

 Performance 
       Timeline  
GE Aerospace 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, GE Aerospace is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
NORTHROP GRUMMAN P 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in NORTHROP GRUMMAN P are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, NORTHROP is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

GE Aerospace and NORTHROP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GE Aerospace and NORTHROP

The main advantage of trading using opposite GE Aerospace and NORTHROP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace position performs unexpectedly, NORTHROP 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 NORTHROP will offset losses from the drop in NORTHROP's long position.
The idea behind GE Aerospace and NORTHROP GRUMMAN P pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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