Correlation Between Solventum Corp and GE HealthCare

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

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

Diversification Opportunities for Solventum Corp and GE HealthCare

0.62

Correlation Coefficient

Solventum Corp  GE HealthCare

Poor diversification

The 3 months correlation between Solventum and GEHC is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Solventum Corp and GE HealthCare Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE HealthCare Techno and Solventum Corp 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 Solventum Corp are associated (or correlated) with GE HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE HealthCare Techno has no effect on the direction of Solventum Corp i.e., Solventum Corp and GE HealthCare go up and down completely randomly.

Pair Corralation between Solventum Corp and GE HealthCare

Given the investment horizon of 90 days Solventum Corp is expected to generate 1.17 times more return on investment than GE HealthCare. However, Solventum Corp is 1.17 times more volatile than GE HealthCare Technologies. It trades about 0.11 of its potential returns per unit of risk. GE HealthCare Technologies is currently generating about 0.04 per unit of risk. If you would invest  6,605  in Solventum Corp on December 29, 2024 and sell it today you would earn a total of  870.00  from holding Solventum Corp or generate 13.17% return on investment over 90 days.

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

Solventum Corp  vs.  GE HealthCare Technologies

Solventum Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Solventum Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting essential indicators, Solventum Corp showed solid returns over the last few months and may actually be approaching a breakup point.

GE HealthCare Techno

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GE HealthCare Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, GE HealthCare is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Solventum Corp and GE HealthCare

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

The idea behind Solventum Corp and GE HealthCare Technologies 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.