Correlation Between GE Aerospace and New Horizon

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

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

Diversification Opportunities for GE Aerospace and New Horizon

-0.75

Correlation Coefficient

GE Aerospace  New Horizon

Pay attention - limited upside

The 3 months correlation between GE Aerospace and New is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and New Horizon Aircraft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Horizon Aircraft 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 New Horizon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Horizon Aircraft has no effect on the direction of GE Aerospace i.e., GE Aerospace and New Horizon go up and down completely randomly.

Pair Corralation between GE Aerospace and New Horizon

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 0.32 times more return on investment than New Horizon. However, GE Aerospace is 3.11 times less risky than New Horizon. It trades about 0.18 of its potential returns per unit of risk. New Horizon Aircraft is currently generating about -0.23 per unit of risk. If you would invest  16,779  in GE Aerospace on December 28, 2024 and sell it today you would earn a total of  3,450  from holding GE Aerospace or generate 20.56% return on investment over 90 days.

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

GE Aerospace  vs.  New Horizon Aircraft

GE Aerospace

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 14 (%) 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.

New Horizon Aircraft

Risk-Adjusted Performance

Very Weak

Over the last 90 days New Horizon Aircraft has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with GE Aerospace and New Horizon

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

The idea behind GE Aerospace and New Horizon Aircraft 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.