Correlation Between GE Aerospace and PGIM Large

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

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

Diversification Opportunities for GE Aerospace and PGIM Large

-0.61

Correlation Coefficient

GE Aerospace  PGIM Large

Excellent diversification

The 3 months correlation between GE Aerospace and PGIM is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and PGIM Large Cap Buffer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGIM Large Cap 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 PGIM Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGIM Large Cap has no effect on the direction of GE Aerospace i.e., GE Aerospace and PGIM Large go up and down completely randomly.

Pair Corralation between GE Aerospace and PGIM Large

Allowing for the 90-day total investment horizon GE Aerospace is expected to under-perform the PGIM Large. In addition to that, GE Aerospace is 6.57 times more volatile than PGIM Large Cap Buffer. It trades about -0.13 of its total potential returns per unit of risk. PGIM Large Cap Buffer is currently generating about -0.09 per unit of volatility. If you would invest  2,800  in PGIM Large Cap Buffer on October 5, 2024 and sell it today you would lose (15.60) from holding PGIM Large Cap Buffer or give up 0.56% of portfolio value over 90 days.

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

GE Aerospace  vs.  PGIM Large Cap Buffer

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 inconsistent 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.

PGIM Large Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PGIM Large Cap Buffer are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, PGIM Large is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with GE Aerospace and PGIM Large

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

The idea behind GE Aerospace and PGIM Large Cap Buffer 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.