Correlation Between GE HealthCare and Newtopia

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

By analyzing existing cross correlation between GE HealthCare Technologies and Newtopia, you can compare the effects of market volatilities on GE HealthCare and Newtopia 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 HealthCare with a short position of Newtopia. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE HealthCare and Newtopia.

Diversification Opportunities for GE HealthCare and Newtopia

-0.54

Correlation Coefficient

GE HealthCare  Newtopia

Excellent diversification

The 3 months correlation between GEHC and Newtopia is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding GE HealthCare Technologies and Newtopia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newtopia and GE HealthCare 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 HealthCare Technologies are associated (or correlated) with Newtopia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newtopia has no effect on the direction of GE HealthCare i.e., GE HealthCare and Newtopia go up and down completely randomly.

Pair Corralation between GE HealthCare and Newtopia

Given the investment horizon of 90 days GE HealthCare is expected to generate 18.31 times less return on investment than Newtopia. But when comparing it to its historical volatility, GE HealthCare Technologies is 11.64 times less risky than Newtopia. It trades about 0.04 of its potential returns per unit of risk. Newtopia is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.14  in Newtopia on December 29, 2024 and sell it today you would lose (0.09) from holding Newtopia or give up 64.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

GE HealthCare Technologies  vs.  Newtopia

GE HealthCare Techno

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GE HealthCare Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, GE HealthCare is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Newtopia

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Newtopia are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Newtopia reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GE HealthCare and Newtopia

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

The idea behind GE HealthCare Technologies and Newtopia 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.