Correlation Between SPECTRAL MEDICAL and General Electric

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

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

Diversification Opportunities for SPECTRAL MEDICAL and General Electric

0.28

Correlation Coefficient

SPECTRAL MEDICAL  General Electric

Modest diversification

The 3 months correlation between SPECTRAL and General is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding SPECTRAL MEDICAL and General Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Electric and SPECTRAL MEDICAL 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 SPECTRAL MEDICAL 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 SPECTRAL MEDICAL i.e., SPECTRAL MEDICAL and General Electric go up and down completely randomly.

Pair Corralation between SPECTRAL MEDICAL and General Electric

Assuming the 90 days horizon SPECTRAL MEDICAL is expected to generate 2.3 times more return on investment than General Electric. However, SPECTRAL MEDICAL is 2.3 times more volatile than General Electric. It trades about 0.14 of its potential returns per unit of risk. General Electric is currently generating about 0.15 per unit of risk. If you would invest  30.00  in SPECTRAL MEDICAL on December 21, 2024 and sell it today you would earn a total of  12.00  from holding SPECTRAL MEDICAL or generate 40.0% return on investment over 90 days.

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

SPECTRAL MEDICAL  vs.  General Electric

SPECTRAL MEDICAL

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPECTRAL MEDICAL are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SPECTRAL MEDICAL reported solid returns over the last few months and may actually be approaching a breakup point.

General Electric

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Electric are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, General Electric unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPECTRAL MEDICAL and General Electric

The main advantage of trading using opposite SPECTRAL MEDICAL and General Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPECTRAL MEDICAL 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 SPECTRAL MEDICAL 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.