Correlation Between Nordex SE and GE Aerospace

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

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

Diversification Opportunities for Nordex SE and GE Aerospace

0.23

Correlation Coefficient

Nordex SE  GE Aerospace

Modest diversification

The 3 months correlation between Nordex and GE Aerospace is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Nordex SE and GE Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE Aerospace and Nordex SE 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 Nordex SE 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 Nordex SE i.e., Nordex SE and GE Aerospace go up and down completely randomly.

Pair Corralation between Nordex SE and GE Aerospace

Assuming the 90 days horizon Nordex SE is expected to generate 3.78 times more return on investment than GE Aerospace. However, Nordex SE is 3.78 times more volatile than GE Aerospace. It trades about 0.13 of its potential returns per unit of risk. GE Aerospace is currently generating about 0.17 per unit of risk. If you would invest  619.00  in Nordex SE on December 30, 2024 and sell it today you would earn a total of  373.00  from holding Nordex SE or generate 60.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.38%
Values	Daily Returns

Nordex SE  vs.  GE Aerospace

Nordex SE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nordex SE are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Nordex SE showed solid returns over the last few months and may actually be approaching a breakup point.

GE Aerospace

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 13 (%) 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 Nordex SE and GE Aerospace

The main advantage of trading using opposite Nordex SE and GE Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordex SE 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 Nordex SE 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.