Correlation Between Stellar and GENERAL

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

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

Diversification Opportunities for Stellar and GENERAL

-0.73

Correlation Coefficient

Stellar  GENERAL

Pay attention - limited upside

The 3 months correlation between Stellar and GENERAL is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and GENERAL ELECTRIC CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GENERAL ELECTRIC and Stellar 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 Stellar are associated (or correlated) with GENERAL. 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 Stellar i.e., Stellar and GENERAL go up and down completely randomly.

Pair Corralation between Stellar and GENERAL

Assuming the 90 days trading horizon Stellar is expected to generate 6.8 times more return on investment than GENERAL. However, Stellar is 6.8 times more volatile than GENERAL ELECTRIC CO. It trades about 0.01 of its potential returns per unit of risk. GENERAL ELECTRIC CO is currently generating about -0.19 per unit of risk. If you would invest  44.00  in Stellar on October 11, 2024 and sell it today you would lose (2.00) from holding Stellar or give up 4.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	72.73%
Values	Daily Returns

Stellar  vs.  GENERAL ELECTRIC CO

Stellar

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellar are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Stellar exhibited solid returns over the last few months and may actually be approaching a breakup point.

GENERAL ELECTRIC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GENERAL ELECTRIC CO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for GENERAL ELECTRIC CO investors.

Pair Trading with Stellar and GENERAL

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

The idea behind Stellar and GENERAL ELECTRIC CO 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.