Correlation Between General Electric and Inepar SA

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

By analyzing existing cross correlation between General Electric and Inepar SA Indstria, you can compare the effects of market volatilities on General Electric and Inepar SA 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 General Electric with a short position of Inepar SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Electric and Inepar SA.

Diversification Opportunities for General Electric and Inepar SA

0.63

Correlation Coefficient

General Electric  Inepar SA

Poor diversification

The 3 months correlation between General and Inepar is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding General Electric and Inepar SA Indstria in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inepar SA Indstria and General Electric 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 General Electric are associated (or correlated) with Inepar SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inepar SA Indstria has no effect on the direction of General Electric i.e., General Electric and Inepar SA go up and down completely randomly.

Pair Corralation between General Electric and Inepar SA

Assuming the 90 days trading horizon General Electric is expected to generate 0.49 times more return on investment than Inepar SA. However, General Electric is 2.02 times less risky than Inepar SA. It trades about 0.12 of its potential returns per unit of risk. Inepar SA Indstria is currently generating about 0.06 per unit of risk. If you would invest  106,446  in General Electric on December 26, 2024 and sell it today you would earn a total of  14,248  from holding General Electric or generate 13.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

General Electric  vs.  Inepar SA Indstria

General Electric

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Electric are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, General Electric sustained solid returns over the last few months and may actually be approaching a breakup point.

Inepar SA Indstria

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Inepar SA Indstria are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Inepar SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with General Electric and Inepar SA

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

The idea behind General Electric and Inepar SA Indstria 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.