Correlation Between GE Vernova and GE Aerospace

Can any of the company-specific risk be diversified away by investing in both GE Vernova and GE Aerospace 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 GE Aerospace 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 GE Aerospace, you can compare the effects of market volatilities on GE Vernova and GE Aerospace 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 GE Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Vernova and GE Aerospace.

Diversification Opportunities for GE Vernova and GE Aerospace

0.09

Correlation Coefficient

GE Vernova  GE Aerospace

Significant diversification

The 3 months correlation between GEV and GE Aerospace is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding GE Vernova LLC and GE Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE Aerospace 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 GE Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE Aerospace has no effect on the direction of GE Vernova i.e., GE Vernova and GE Aerospace go up and down completely randomly.

Pair Corralation between GE Vernova and GE Aerospace

Considering the 90-day investment horizon GE Vernova is expected to generate 6.25 times less return on investment than GE Aerospace. In addition to that, GE Vernova is 2.62 times more volatile than GE Aerospace. It trades about 0.01 of its total potential returns per unit of risk. GE Aerospace is currently generating about 0.19 per unit of volatility. If you would invest  16,843  in GE Aerospace on December 22, 2024 and sell it today you would earn a total of  3,570  from holding GE Aerospace or generate 21.2% return on investment over 90 days.

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

GE Vernova LLC  vs.  GE Aerospace

GE Vernova LLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days GE Vernova LLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, GE Vernova is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

GE Aerospace

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, GE Aerospace exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GE Vernova and GE Aerospace

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

The idea behind GE Vernova LLC and GE Aerospace 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.