Correlation Between GE Aerospace and Park Electrochemical

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

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

Diversification Opportunities for GE Aerospace and Park Electrochemical

-0.41

Correlation Coefficient

GE Aerospace  Park Electrochemical

Very good diversification

The 3 months correlation between GE Aerospace and Park is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Park Electrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Electrochemical 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 Park Electrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Electrochemical has no effect on the direction of GE Aerospace i.e., GE Aerospace and Park Electrochemical go up and down completely randomly.

Pair Corralation between GE Aerospace and Park Electrochemical

Allowing for the 90-day total investment horizon GE Aerospace is expected to under-perform the Park Electrochemical. In addition to that, GE Aerospace is 1.2 times more volatile than Park Electrochemical. It trades about -0.16 of its total potential returns per unit of risk. Park Electrochemical is currently generating about -0.19 per unit of volatility. If you would invest  1,511  in Park Electrochemical on September 23, 2024 and sell it today you would lose (104.00) from holding Park Electrochemical or give up 6.88% of portfolio value over 90 days.

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

GE Aerospace  vs.  Park Electrochemical

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 abnormal 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.

Park Electrochemical

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Park Electrochemical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal forward-looking signals, Park Electrochemical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GE Aerospace and Park Electrochemical

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

The idea behind GE Aerospace and Park Electrochemical 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.