Correlation Between Nordon Indstrias and General Electric

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

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

Diversification Opportunities for Nordon Indstrias and General Electric

-0.6

Correlation Coefficient

Nordon Indstrias  General Electric

Excellent diversification

The 3 months correlation between Nordon and General is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Nordon Indstrias Metalrgicas and General Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Electric and Nordon Indstrias 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 Nordon Indstrias Metalrgicas are associated (or correlated) with General Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Electric has no effect on the direction of Nordon Indstrias i.e., Nordon Indstrias and General Electric go up and down completely randomly.

Pair Corralation between Nordon Indstrias and General Electric

Assuming the 90 days trading horizon Nordon Indstrias Metalrgicas is expected to under-perform the General Electric. In addition to that, Nordon Indstrias is 1.14 times more volatile than General Electric. It trades about -0.07 of its total potential returns per unit of risk. General Electric is currently generating about 0.12 per unit of volatility. If you would invest  106,446  in General Electric on December 25, 2024 and sell it today you would earn a total of  14,227  from holding General Electric or generate 13.37% return on investment over 90 days.

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

Nordon Indstrias Metalrgicas  vs.  General Electric

Nordon Indstrias Met

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nordon Indstrias Metalrgicas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic 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 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 uncertain basic indicators, General Electric sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nordon Indstrias and General Electric

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

The idea behind Nordon Indstrias Metalrgicas and General Electric 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.