Correlation Between GE Aerospace and Amaero International

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

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

Diversification Opportunities for GE Aerospace and Amaero International

0.47

Correlation Coefficient

GE Aerospace  Amaero International

Very weak diversification

The 3 months correlation between GE Aerospace and Amaero is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Amaero International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amaero International 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 Amaero International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amaero International has no effect on the direction of GE Aerospace i.e., GE Aerospace and Amaero International go up and down completely randomly.

Pair Corralation between GE Aerospace and Amaero International

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 0.6 times more return on investment than Amaero International. However, GE Aerospace is 1.68 times less risky than Amaero International. It trades about -0.06 of its potential returns per unit of risk. Amaero International is currently generating about -0.16 per unit of risk. If you would invest  18,117  in GE Aerospace on September 14, 2024 and sell it today you would lose (1,518) from holding GE Aerospace or give up 8.38% of portfolio value over 90 days.

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

GE Aerospace  vs.  Amaero International

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 latest abnormal performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Amaero International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amaero International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with GE Aerospace and Amaero International

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

The idea behind GE Aerospace and Amaero International 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.