Correlation Between GENERAL and Snap On

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

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

Diversification Opportunities for GENERAL and Snap On

0.45

Correlation Coefficient

GENERAL  Snap On

Very weak diversification

The 3 months correlation between GENERAL and Snap is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding GENERAL ELEC CAP and Snap On in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snap On and GENERAL 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 GENERAL ELEC CAP are associated (or correlated) with Snap On. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snap On has no effect on the direction of GENERAL i.e., GENERAL and Snap On go up and down completely randomly.

Pair Corralation between GENERAL and Snap On

Assuming the 90 days trading horizon GENERAL is expected to generate 3.71 times less return on investment than Snap On. In addition to that, GENERAL is 1.16 times more volatile than Snap On. It trades about 0.01 of its total potential returns per unit of risk. Snap On is currently generating about 0.06 per unit of volatility. If you would invest  24,436  in Snap On on October 26, 2024 and sell it today you would earn a total of  10,612  from holding Snap On or generate 43.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	28.14%
Values	Daily Returns

GENERAL ELEC CAP  vs.  Snap On

GENERAL ELEC CAP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GENERAL ELEC CAP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GENERAL is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Snap On

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Snap On are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Snap On may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GENERAL and Snap On

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

The idea behind GENERAL ELEC CAP and Snap On 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.