Correlation Between GE Aerospace and Loar Holdings

Can any of the company-specific risk be diversified away by investing in both GE Aerospace and Loar 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 Loar 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 Loar Holdings, you can compare the effects of market volatilities on GE Aerospace and Loar 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 Loar Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Aerospace and Loar Holdings.

Diversification Opportunities for GE Aerospace and Loar Holdings

-0.36

Correlation Coefficient

GE Aerospace  Loar Holdings

Very good diversification

The 3 months correlation between GE Aerospace and Loar is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Loar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loar 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 Loar Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loar Holdings has no effect on the direction of GE Aerospace i.e., GE Aerospace and Loar Holdings go up and down completely randomly.

Pair Corralation between GE Aerospace and Loar Holdings

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 0.7 times more return on investment than Loar Holdings. However, GE Aerospace is 1.43 times less risky than Loar Holdings. It trades about 0.2 of its potential returns per unit of risk. Loar Holdings is currently generating about -0.07 per unit of risk. If you would invest  16,779  in GE Aerospace on December 29, 2024 and sell it today you would earn a total of  3,809  from holding GE Aerospace or generate 22.7% 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.  Loar Holdings

GE Aerospace

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 15 (%) 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.

Loar Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Loar Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest sluggish performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with GE Aerospace and Loar Holdings

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

The idea behind GE Aerospace and Loar 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.