Correlation Between GE Aerospace and Black Knight

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

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

Diversification Opportunities for GE Aerospace and Black Knight

-0.61

Correlation Coefficient

GE Aerospace  Black Knight

Excellent diversification

The 3 months correlation between GE Aerospace and Black is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Black Knight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Knight 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 Black Knight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Knight has no effect on the direction of GE Aerospace i.e., GE Aerospace and Black Knight go up and down completely randomly.

Pair Corralation between GE Aerospace and Black Knight

If you would invest  10,210  in GE Aerospace on October 5, 2024 and sell it today you would earn a total of  6,649  from holding GE Aerospace or generate 65.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	0.4%
Values	Daily Returns

GE Aerospace  vs.  Black Knight

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 inconsistent 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.

Black Knight

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Black Knight has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward-looking signals, Black Knight is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with GE Aerospace and Black Knight

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

The idea behind GE Aerospace and Black Knight 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.