Correlation Between GE Aerospace and LEVEL

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

By analyzing existing cross correlation between GE Aerospace and LEVEL 3 FING, you can compare the effects of market volatilities on GE Aerospace and LEVEL 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 LEVEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Aerospace and LEVEL.

Diversification Opportunities for GE Aerospace and LEVEL

0.18

Correlation Coefficient

GE Aerospace  LEVEL

Average diversification

The 3 months correlation between GE Aerospace and LEVEL is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and LEVEL 3 FING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LEVEL 3 FING 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 LEVEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LEVEL 3 FING has no effect on the direction of GE Aerospace i.e., GE Aerospace and LEVEL go up and down completely randomly.

Pair Corralation between GE Aerospace and LEVEL

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 2.13 times less return on investment than LEVEL. But when comparing it to its historical volatility, GE Aerospace is 2.8 times less risky than LEVEL. It trades about 0.08 of its potential returns per unit of risk. LEVEL 3 FING is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  7,525  in LEVEL 3 FING on September 4, 2024 and sell it today you would earn a total of  725.00  from holding LEVEL 3 FING or generate 9.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	84.38%
Values	Daily Returns

GE Aerospace  vs.  LEVEL 3 FING

GE Aerospace

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, GE Aerospace may actually be approaching a critical reversion point that can send shares even higher in January 2025.

LEVEL 3 FING

Risk-Adjusted Performance

4 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LEVEL 3 FING are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, LEVEL sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GE Aerospace and LEVEL

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

The idea behind GE Aerospace and LEVEL 3 FING 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..