Correlation Between GE Aerospace and Nouveau Life

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

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

Diversification Opportunities for GE Aerospace and Nouveau Life

-0.03

Correlation Coefficient

GE Aerospace  Nouveau Life

Good diversification

The 3 months correlation between GE Aerospace and Nouveau is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Nouveau Life Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nouveau Life Pharmac 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 Nouveau Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nouveau Life Pharmac has no effect on the direction of GE Aerospace i.e., GE Aerospace and Nouveau Life go up and down completely randomly.

Pair Corralation between GE Aerospace and Nouveau Life

Allowing for the 90-day total investment horizon GE Aerospace is expected to under-perform the Nouveau Life. But the stock apears to be less risky and, when comparing its historical volatility, GE Aerospace is 94.62 times less risky than Nouveau Life. The stock trades about -0.04 of its potential returns per unit of risk. The Nouveau Life Pharmaceuticals is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  0.02  in Nouveau Life Pharmaceuticals on September 13, 2024 and sell it today you would lose (0.01) from holding Nouveau Life Pharmaceuticals or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

GE Aerospace  vs.  Nouveau Life Pharmaceuticals

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 rather sound technical and fundamental indicators, GE Aerospace is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Nouveau Life Pharmac

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nouveau Life Pharmaceuticals are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Nouveau Life showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GE Aerospace and Nouveau Life

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

The idea behind GE Aerospace and Nouveau Life Pharmaceuticals 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.