Correlation Between GE Aerospace and Blue Whale

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

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

Diversification Opportunities for GE Aerospace and Blue Whale

-0.68

Correlation Coefficient

GE Aerospace  Blue Whale

Excellent diversification

The 3 months correlation between GE Aerospace and Blue is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Blue Whale Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Whale Acquisition 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 Blue Whale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Whale Acquisition has no effect on the direction of GE Aerospace i.e., GE Aerospace and Blue Whale go up and down completely randomly.

Pair Corralation between GE Aerospace and Blue Whale

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 8.69 times less return on investment than Blue Whale. But when comparing it to its historical volatility, GE Aerospace is 15.17 times less risky than Blue Whale. It trades about 0.16 of its potential returns per unit of risk. Blue Whale Acquisition is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  6.00  in Blue Whale Acquisition on September 5, 2024 and sell it today you would lose (2.07) from holding Blue Whale Acquisition or give up 34.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	20.4%
Values	Daily Returns

GE Aerospace  vs.  Blue Whale Acquisition

GE Aerospace

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, GE Aerospace may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Blue Whale Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Whale Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Blue Whale is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with GE Aerospace and Blue Whale

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

The idea behind GE Aerospace and Blue Whale Acquisition 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.