Correlation Between GE Aerospace and Disney

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

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

Diversification Opportunities for GE Aerospace and Disney

0.18

Correlation Coefficient

GE Aerospace  Disney

Average diversification

The 3 months correlation between GE Aerospace and Disney is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney 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 Disney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walt Disney has no effect on the direction of GE Aerospace i.e., GE Aerospace and Disney go up and down completely randomly.

Pair Corralation between GE Aerospace and Disney

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 5.58 times less return on investment than Disney. In addition to that, GE Aerospace is 1.42 times more volatile than Walt Disney. It trades about 0.04 of its total potential returns per unit of risk. Walt Disney is currently generating about 0.29 per unit of volatility. If you would invest  9,038  in Walt Disney on August 30, 2024 and sell it today you would earn a total of  2,722  from holding Walt Disney or generate 30.12% return on investment over 90 days.

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

GE Aerospace  vs.  Walt Disney

GE Aerospace

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 2 (%) 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.

Walt Disney

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GE Aerospace and Disney

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

The idea behind GE Aerospace and Walt Disney 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 Global Correlations module to find global opportunities by holding instruments from different markets.