Correlation Between GE Aerospace and SANUWAVE Health

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

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

Diversification Opportunities for GE Aerospace and SANUWAVE Health

-0.44

Correlation Coefficient

GE Aerospace  SANUWAVE Health

Very good diversification

The 3 months correlation between GE Aerospace and SANUWAVE is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and SANUWAVE Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SANUWAVE Health 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 SANUWAVE Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SANUWAVE Health has no effect on the direction of GE Aerospace i.e., GE Aerospace and SANUWAVE Health go up and down completely randomly.

Pair Corralation between GE Aerospace and SANUWAVE Health

Allowing for the 90-day total investment horizon GE Aerospace is expected to under-perform the SANUWAVE Health. But the stock apears to be less risky and, when comparing its historical volatility, GE Aerospace is 4.29 times less risky than SANUWAVE Health. The stock trades about -0.06 of its potential returns per unit of risk. The SANUWAVE Health is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  713.00  in SANUWAVE Health on September 16, 2024 and sell it today you would earn a total of  1,311  from holding SANUWAVE Health or generate 183.87% return on investment over 90 days.

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

GE Aerospace  vs.  SANUWAVE Health

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.

SANUWAVE Health

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SANUWAVE Health are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SANUWAVE Health showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GE Aerospace and SANUWAVE Health

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

The idea behind GE Aerospace and SANUWAVE Health 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.