Correlation Between GE Aerospace and CARDINAL

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

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

Diversification Opportunities for GE Aerospace and CARDINAL

0.01

Correlation Coefficient

GE Aerospace  CARDINAL

Significant diversification

The 3 months correlation between GE Aerospace and CARDINAL is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and CARDINAL HEALTH INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARDINAL HEALTH INC 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 CARDINAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARDINAL HEALTH INC has no effect on the direction of GE Aerospace i.e., GE Aerospace and CARDINAL go up and down completely randomly.

Pair Corralation between GE Aerospace and CARDINAL

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 1.54 times more return on investment than CARDINAL. However, GE Aerospace is 1.54 times more volatile than CARDINAL HEALTH INC. It trades about 0.02 of its potential returns per unit of risk. CARDINAL HEALTH INC is currently generating about -0.12 per unit of risk. If you would invest  16,945  in GE Aerospace on September 12, 2024 and sell it today you would earn a total of  182.00  from holding GE Aerospace or generate 1.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	53.97%
Values	Daily Returns

GE Aerospace  vs.  CARDINAL HEALTH INC

GE Aerospace

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 1 (%) 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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

CARDINAL HEALTH INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CARDINAL HEALTH INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for CARDINAL HEALTH INC investors.

Pair Trading with GE Aerospace and CARDINAL

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

The idea behind GE Aerospace and CARDINAL HEALTH INC 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.