Correlation Between GE Aerospace and BARRICK

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

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

Diversification Opportunities for GE Aerospace and BARRICK

0.71

Correlation Coefficient

GE Aerospace  BARRICK

Poor diversification

The 3 months correlation between GE Aerospace and BARRICK is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and BARRICK NORTH AMER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BARRICK NORTH AMER 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 BARRICK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BARRICK NORTH AMER has no effect on the direction of GE Aerospace i.e., GE Aerospace and BARRICK go up and down completely randomly.

Pair Corralation between GE Aerospace and BARRICK

Allowing for the 90-day total investment horizon GE Aerospace is expected to under-perform the BARRICK. But the stock apears to be less risky and, when comparing its historical volatility, GE Aerospace is 1.12 times less risky than BARRICK. The stock trades about -0.07 of its potential returns per unit of risk. The BARRICK NORTH AMER is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  10,604  in BARRICK NORTH AMER on September 18, 2024 and sell it today you would lose (352.00) from holding BARRICK NORTH AMER or give up 3.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	85.71%
Values	Daily Returns

GE Aerospace  vs.  BARRICK NORTH AMER

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.

BARRICK NORTH AMER

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BARRICK NORTH AMER has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BARRICK 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 BARRICK

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

The idea behind GE Aerospace and BARRICK NORTH AMER 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.