Correlation Between GE Aerospace and Scientific

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

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

Diversification Opportunities for GE Aerospace and Scientific

0.4

Correlation Coefficient

GE Aerospace  Scientific

Very weak diversification

The 3 months correlation between GE Aerospace and Scientific is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Scientific Games International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scientific Games Int 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 Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scientific Games Int has no effect on the direction of GE Aerospace i.e., GE Aerospace and Scientific go up and down completely randomly.

Pair Corralation between GE Aerospace and Scientific

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 9.66 times less return on investment than Scientific. But when comparing it to its historical volatility, GE Aerospace is 27.92 times less risky than Scientific. It trades about 0.12 of its potential returns per unit of risk. Scientific Games International is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  10,020  in Scientific Games International on October 4, 2024 and sell it today you would lose (340.00) from holding Scientific Games International or give up 3.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	89.31%
Values	Daily Returns

GE Aerospace  vs.  Scientific Games International

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.

Scientific Games Int

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scientific Games International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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 Scientific Games International investors.

Pair Trading with GE Aerospace and Scientific

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

The idea behind GE Aerospace and Scientific Games International 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.