Correlation Between HE Equipment and GENERAL

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

By analyzing existing cross correlation between HE Equipment Services and GENERAL ELEC CAP, you can compare the effects of market volatilities on HE Equipment and GENERAL 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 HE Equipment with a short position of GENERAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of HE Equipment and GENERAL.

Diversification Opportunities for HE Equipment and GENERAL

0.1

Correlation Coefficient

HE Equipment  GENERAL

Average diversification

The 3 months correlation between HEES and GENERAL is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services and GENERAL ELEC CAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GENERAL ELEC CAP and HE Equipment 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 HE Equipment Services are associated (or correlated) with GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GENERAL ELEC CAP has no effect on the direction of HE Equipment i.e., HE Equipment and GENERAL go up and down completely randomly.

Pair Corralation between HE Equipment and GENERAL

Given the investment horizon of 90 days HE Equipment Services is expected to under-perform the GENERAL. In addition to that, HE Equipment is 1.53 times more volatile than GENERAL ELEC CAP. It trades about -0.56 of its total potential returns per unit of risk. GENERAL ELEC CAP is currently generating about 0.01 per unit of volatility. If you would invest  10,245  in GENERAL ELEC CAP on October 11, 2024 and sell it today you would earn a total of  8.00  from holding GENERAL ELEC CAP or generate 0.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	61.9%
Values	Daily Returns

HE Equipment Services  vs.  GENERAL ELEC CAP

HE Equipment Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HE Equipment Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

GENERAL ELEC CAP

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GENERAL ELEC CAP are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, GENERAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HE Equipment and GENERAL

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

The idea behind HE Equipment Services and GENERAL ELEC CAP 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 Stocks Directory module to find actively traded stocks across global markets.