Correlation Between GE Aerospace and Capital Group

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

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

Diversification Opportunities for GE Aerospace and Capital Group

-0.43

Correlation Coefficient

GE Aerospace  Capital Group

Very good diversification

The 3 months correlation between GE Aerospace and Capital is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Capital Group Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Growth 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 Capital Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Group Growth has no effect on the direction of GE Aerospace i.e., GE Aerospace and Capital Group go up and down completely randomly.

Pair Corralation between GE Aerospace and Capital Group

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 6.72 times less return on investment than Capital Group. In addition to that, GE Aerospace is 1.44 times more volatile than Capital Group Growth. It trades about 0.02 of its total potential returns per unit of risk. Capital Group Growth is currently generating about 0.16 per unit of volatility. If you would invest  3,505  in Capital Group Growth on October 23, 2024 and sell it today you would earn a total of  390.00  from holding Capital Group Growth or generate 11.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

GE Aerospace  vs.  Capital Group Growth

GE Aerospace

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Capital Group Growth

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Group Growth are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal technical and fundamental indicators, Capital Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GE Aerospace and Capital Group

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

The idea behind GE Aerospace and Capital Group Growth 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.