Correlation Between IONQ and GE Aerospace
Can any of the company-specific risk be diversified away by investing in both IONQ and GE Aerospace 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 IONQ and GE Aerospace into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IONQ Inc and GE Aerospace, you can compare the effects of market volatilities on IONQ and GE Aerospace 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 IONQ with a short position of GE Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of IONQ and GE Aerospace.
Diversification Opportunities for IONQ and GE Aerospace
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between IONQ and GE Aerospace is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding IONQ Inc and GE Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE Aerospace and IONQ 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 IONQ Inc are associated (or correlated) with GE Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE Aerospace has no effect on the direction of IONQ i.e., IONQ and GE Aerospace go up and down completely randomly.
Pair Corralation between IONQ and GE Aerospace
Given the investment horizon of 90 days IONQ Inc is expected to generate 3.02 times more return on investment than GE Aerospace. However, IONQ is 3.02 times more volatile than GE Aerospace. It trades about 0.11 of its potential returns per unit of risk. GE Aerospace is currently generating about 0.16 per unit of risk. If you would invest 1,121 in IONQ Inc on September 1, 2024 and sell it today you would earn a total of 2,529 from holding IONQ Inc or generate 225.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IONQ Inc vs. GE Aerospace
Performance |
| Timeline |
| IONQ Inc |
| GE Aerospace |
IONQ and GE Aerospace Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IONQ and GE Aerospace
The main advantage of trading using opposite IONQ and GE Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IONQ position performs unexpectedly, GE Aerospace 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 GE Aerospace will offset losses from the drop in GE Aerospace's long position.The idea behind IONQ Inc and GE Aerospace 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.| 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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