Correlation Between GE Aerospace and Fidelity Emerging

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

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

Diversification Opportunities for GE Aerospace and Fidelity Emerging

0.54

Correlation Coefficient

GE Aerospace  Fidelity Emerging

Very weak diversification

The 3 months correlation between GE Aerospace and Fidelity is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Fidelity Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Emerging Markets 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 Fidelity Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Emerging Markets has no effect on the direction of GE Aerospace i.e., GE Aerospace and Fidelity Emerging go up and down completely randomly.

Pair Corralation between GE Aerospace and Fidelity Emerging

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 2.0 times less return on investment than Fidelity Emerging. In addition to that, GE Aerospace is 2.12 times more volatile than Fidelity Emerging Markets. It trades about 0.02 of its total potential returns per unit of risk. Fidelity Emerging Markets is currently generating about 0.08 per unit of volatility. If you would invest  2,527  in Fidelity Emerging Markets on September 12, 2024 and sell it today you would earn a total of  113.00  from holding Fidelity Emerging Markets or generate 4.47% return on investment over 90 days.

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

GE Aerospace  vs.  Fidelity Emerging Markets

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.

Fidelity Emerging Markets

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Emerging Markets are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Fidelity Emerging is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with GE Aerospace and Fidelity Emerging

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

The idea behind GE Aerospace and Fidelity Emerging Markets 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.