Correlation Between GE Aerospace and Air Industries

Can any of the company-specific risk be diversified away by investing in both GE Aerospace and Air Industries 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 Air Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GE Aerospace and Air Industries Group, you can compare the effects of market volatilities on GE Aerospace and Air Industries 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 Air Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Aerospace and Air Industries.

Diversification Opportunities for GE Aerospace and Air Industries

0.62

Correlation Coefficient

GE Aerospace  Air Industries

Poor diversification

The 3 months correlation between GE Aerospace and Air is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Air Industries Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Industries Group 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 Air Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Industries Group has no effect on the direction of GE Aerospace i.e., GE Aerospace and Air Industries go up and down completely randomly.

Pair Corralation between GE Aerospace and Air Industries

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 0.8 times more return on investment than Air Industries. However, GE Aerospace is 1.25 times less risky than Air Industries. It trades about -0.1 of its potential returns per unit of risk. Air Industries Group is currently generating about -0.28 per unit of risk. If you would invest  18,021  in GE Aerospace on September 26, 2024 and sell it today you would lose (872.00) from holding GE Aerospace or give up 4.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

GE Aerospace  vs.  Air Industries Group

GE Aerospace

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GE Aerospace has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, GE Aerospace is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Air Industries Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air Industries Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with GE Aerospace and Air Industries

The main advantage of trading using opposite GE Aerospace and Air Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace position performs unexpectedly, Air Industries 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 Air Industries will offset losses from the drop in Air Industries' long position.

The idea behind GE Aerospace and Air Industries Group 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.