Correlation Between GE Aerospace and Technology One

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Can any of the company-specific risk be diversified away by investing in both GE Aerospace and Technology One 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 Technology One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GE Aerospace and Technology One Limited, you can compare the effects of market volatilities on GE Aerospace and Technology One 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 Technology One. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Aerospace and Technology One.

Diversification Opportunities for GE Aerospace and Technology One

GE AerospaceTechnologyDiversified AwayGE AerospaceTechnologyDiversified Away100%
-0.57
  Correlation Coefficient

Excellent diversification

The 3 months correlation between GE Aerospace and Technology is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Technology One Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology One 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 Technology One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology One has no effect on the direction of GE Aerospace i.e., GE Aerospace and Technology One go up and down completely randomly.

Pair Corralation between GE Aerospace and Technology One

Allowing for the 90-day total investment horizon GE Aerospace is expected to under-perform the Technology One. But the stock apears to be less risky and, when comparing its historical volatility, GE Aerospace is 4.85 times less risky than Technology One. The stock trades about -0.07 of its potential returns per unit of risk. The Technology One Limited is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  962.00  in Technology One Limited on September 18, 2024 and sell it today you would earn a total of  1,008  from holding Technology One Limited or generate 104.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy98.44%
ValuesDaily Returns

GE Aerospace  vs.  Technology One Limited

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 010203040506070
JavaScript chart by amCharts 3.21.15GE THNOF
       Timeline  
GE Aerospace 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec165170175180185190195
Technology One 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Technology One Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Technology One reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec101214161820

GE Aerospace and Technology One Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.06-2.29-1.52-0.750.00.731.462.22.93 0.020.040.060.080.10
JavaScript chart by amCharts 3.21.15GE THNOF
       Returns  

Pair Trading with GE Aerospace and Technology One

The main advantage of trading using opposite GE Aerospace and Technology One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace position performs unexpectedly, Technology One 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 Technology One will offset losses from the drop in Technology One's long position.
The idea behind GE Aerospace and Technology One Limited 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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