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

-0.53

Correlation Coefficient

GE Aerospace  CARDINAL

Excellent diversification

The 3 months correlation between GE Aerospace and CARDINAL is -0.53. 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 0.13 of its potential returns per unit of risk. CARDINAL HEALTH INC is currently generating about -0.06 per unit of risk. If you would invest  18,015  in GE Aerospace on December 2, 2024 and sell it today you would earn a total of  2,683  from holding GE Aerospace or generate 14.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	62.3%
Values	Daily Returns

GE Aerospace  vs.  CARDINAL HEALTH INC

GE Aerospace

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, GE Aerospace exhibited solid returns over the last few months and may actually be approaching a breakup point.

CARDINAL HEALTH INC

Risk-Adjusted Performance

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 somewhat strong basic indicators, CARDINAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.