Correlation Between GE Aerospace and ProShares Short

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

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

Diversification Opportunities for GE Aerospace and ProShares Short

-0.52

Correlation Coefficient

GE Aerospace  ProShares Short

Excellent diversification

The 3 months correlation between GE Aerospace and ProShares is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and ProShares Short MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short MSCI 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 ProShares Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Short MSCI has no effect on the direction of GE Aerospace i.e., GE Aerospace and ProShares Short go up and down completely randomly.

Pair Corralation between GE Aerospace and ProShares Short

Allowing for the 90-day total investment horizon GE Aerospace is expected to under-perform the ProShares Short. In addition to that, GE Aerospace is 2.93 times more volatile than ProShares Short MSCI. It trades about -0.17 of its total potential returns per unit of risk. ProShares Short MSCI is currently generating about -0.15 per unit of volatility. If you would invest  1,671  in ProShares Short MSCI on September 16, 2024 and sell it today you would lose (31.00) from holding ProShares Short MSCI or give up 1.86% of portfolio value over 90 days.

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

GE Aerospace  vs.  ProShares Short MSCI

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 abnormal 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.

ProShares Short MSCI

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Short MSCI are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, ProShares Short is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GE Aerospace and ProShares Short

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

The idea behind GE Aerospace and ProShares Short MSCI 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.