Correlation Between GE Aerospace and Dream Unlimited

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

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

Diversification Opportunities for GE Aerospace and Dream Unlimited

-0.29

Correlation Coefficient

GE Aerospace  Dream Unlimited

Very good diversification

The 3 months correlation between GE Aerospace and Dream is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Dream Unlimited Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dream Unlimited Corp 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 Dream Unlimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dream Unlimited Corp has no effect on the direction of GE Aerospace i.e., GE Aerospace and Dream Unlimited go up and down completely randomly.

Pair Corralation between GE Aerospace and Dream Unlimited

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 0.95 times more return on investment than Dream Unlimited. However, GE Aerospace is 1.06 times less risky than Dream Unlimited. It trades about 0.14 of its potential returns per unit of risk. Dream Unlimited Corp is currently generating about -0.12 per unit of risk. If you would invest  17,263  in GE Aerospace on December 5, 2024 and sell it today you would earn a total of  2,614  from holding GE Aerospace or generate 15.14% return on investment over 90 days.

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

GE Aerospace  vs.  Dream Unlimited Corp

GE Aerospace

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, GE Aerospace exhibited solid returns over the last few months and may actually be approaching a breakup point.

Dream Unlimited Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dream Unlimited Corp 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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with GE Aerospace and Dream Unlimited

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

The idea behind GE Aerospace and Dream Unlimited Corp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.