Correlation Between GE Aerospace and Growth Fund

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

By analyzing existing cross correlation between GE Aerospace and Growth Fund R6, you can compare the effects of market volatilities on GE Aerospace and Growth Fund 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 GE Aerospace with a short position of Growth Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Aerospace and Growth Fund.

Diversification Opportunities for GE Aerospace and Growth Fund

-0.57

Correlation Coefficient

GE Aerospace  Growth Fund

Excellent diversification

The 3 months correlation between GE Aerospace and Growth is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Growth Fund R6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Fund R6 and GE Aerospace 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 GE Aerospace are associated (or correlated) with Growth Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Fund R6 has no effect on the direction of GE Aerospace i.e., GE Aerospace and Growth Fund go up and down completely randomly.

Pair Corralation between GE Aerospace and Growth Fund

Allowing for the 90-day total investment horizon GE Aerospace is expected to under-perform the Growth Fund. In addition to that, GE Aerospace is 1.61 times more volatile than Growth Fund R6. It trades about -0.08 of its total potential returns per unit of risk. Growth Fund R6 is currently generating about 0.02 per unit of volatility. If you would invest  6,028  in Growth Fund R6 on September 21, 2024 and sell it today you would earn a total of  52.00  from holding Growth Fund R6 or generate 0.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

GE Aerospace  vs.  Growth Fund R6

GE Aerospace

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GE Aerospace has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Growth Fund R6

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Growth Fund R6 are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Growth Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GE Aerospace and Growth Fund

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

The idea behind GE Aerospace and Growth Fund R6 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.