Correlation Between GE Aerospace and AMERICAN

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

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

Diversification Opportunities for GE Aerospace and AMERICAN

0.03

Correlation Coefficient

GE Aerospace  AMERICAN

Significant diversification

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

Pair Corralation between GE Aerospace and AMERICAN

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 7.42 times more return on investment than AMERICAN. However, GE Aerospace is 7.42 times more volatile than AMERICAN TOWER P. It trades about 0.13 of its potential returns per unit of risk. AMERICAN TOWER P is currently generating about 0.0 per unit of risk. If you would invest  6,635  in GE Aerospace on October 24, 2024 and sell it today you would earn a total of  12,082  from holding GE Aerospace or generate 182.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

GE Aerospace  vs.  AMERICAN TOWER P

GE Aerospace

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

AMERICAN TOWER P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMERICAN TOWER P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AMERICAN is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GE Aerospace and AMERICAN

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

The idea behind GE Aerospace and AMERICAN TOWER P 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.