Correlation Between GE Vernova and Aris Water

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

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

Diversification Opportunities for GE Vernova and Aris Water

0.84

Correlation Coefficient

GE Vernova  Aris Water

Very poor diversification

The 3 months correlation between GEV and Aris is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding GE Vernova LLC and Aris Water Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aris Water Solutions and GE Vernova 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 Vernova LLC are associated (or correlated) with Aris Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aris Water Solutions has no effect on the direction of GE Vernova i.e., GE Vernova and Aris Water go up and down completely randomly.

Pair Corralation between GE Vernova and Aris Water

Considering the 90-day investment horizon GE Vernova is expected to generate 1.14 times less return on investment than Aris Water. But when comparing it to its historical volatility, GE Vernova LLC is 1.71 times less risky than Aris Water. It trades about 0.29 of its potential returns per unit of risk. Aris Water Solutions is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,580  in Aris Water Solutions on September 12, 2024 and sell it today you would earn a total of  1,009  from holding Aris Water Solutions or generate 63.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

GE Vernova LLC  vs.  Aris Water Solutions

GE Vernova LLC

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GE Vernova LLC are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, GE Vernova showed solid returns over the last few months and may actually be approaching a breakup point.

Aris Water Solutions

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aris Water Solutions are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Aris Water unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GE Vernova and Aris Water

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

The idea behind GE Vernova LLC and Aris Water Solutions 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.