Correlation Between GE Aerospace and Ehang Holdings

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

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

Diversification Opportunities for GE Aerospace and Ehang Holdings

0.15

Correlation Coefficient

GE Aerospace  Ehang Holdings

Average diversification

The 3 months correlation between GE Aerospace and Ehang is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Ehang Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ehang Holdings 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 Ehang Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ehang Holdings has no effect on the direction of GE Aerospace i.e., GE Aerospace and Ehang Holdings go up and down completely randomly.

Pair Corralation between GE Aerospace and Ehang Holdings

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 16.06 times less return on investment than Ehang Holdings. But when comparing it to its historical volatility, GE Aerospace is 3.25 times less risky than Ehang Holdings. It trades about 0.02 of its potential returns per unit of risk. Ehang Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,211  in Ehang Holdings on September 12, 2024 and sell it today you would earn a total of  338.00  from holding Ehang Holdings or generate 27.91% 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.  Ehang Holdings

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Ehang Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ehang Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Ehang Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GE Aerospace and Ehang Holdings

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

The idea behind GE Aerospace and Ehang Holdings 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.