Correlation Between GE Aerospace and Woolworths Holdings

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

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

Diversification Opportunities for GE Aerospace and Woolworths Holdings

-0.49

Correlation Coefficient

GE Aerospace  Woolworths Holdings

Very good diversification

The 3 months correlation between GE Aerospace and Woolworths is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Woolworths Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths Holdings 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 Woolworths Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woolworths Holdings has no effect on the direction of GE Aerospace i.e., GE Aerospace and Woolworths Holdings go up and down completely randomly.

Pair Corralation between GE Aerospace and Woolworths Holdings

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 0.4 times more return on investment than Woolworths Holdings. However, GE Aerospace is 2.49 times less risky than Woolworths Holdings. It trades about 0.12 of its potential returns per unit of risk. Woolworths Holdings Ltd is currently generating about 0.0 per unit of risk. If you would invest  19,443  in GE Aerospace on November 29, 2024 and sell it today you would earn a total of  718.00  from holding GE Aerospace or generate 3.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

GE Aerospace  vs.  Woolworths Holdings Ltd

GE Aerospace

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 8 (%) 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 March 2025.

Woolworths Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Woolworths Holdings Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with GE Aerospace and Woolworths Holdings

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

The idea behind GE Aerospace and Woolworths Holdings Ltd 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.