Correlation Between GE Aerospace and Planet Labs

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

By analyzing existing cross correlation between GE Aerospace and Planet Labs PBC, you can compare the effects of market volatilities on GE Aerospace and Planet Labs 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 Planet Labs. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Aerospace and Planet Labs.

Diversification Opportunities for GE Aerospace and Planet Labs

-0.61

Correlation Coefficient

GE Aerospace  Planet Labs

Excellent diversification

The 3 months correlation between GE Aerospace and Planet is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Planet Labs PBC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planet Labs PBC 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 Planet Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Planet Labs PBC has no effect on the direction of GE Aerospace i.e., GE Aerospace and Planet Labs go up and down completely randomly.

Pair Corralation between GE Aerospace and Planet Labs

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 18.3 times less return on investment than Planet Labs. But when comparing it to its historical volatility, GE Aerospace is 2.59 times less risky than Planet Labs. It trades about 0.02 of its potential returns per unit of risk. Planet Labs PBC is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  174.00  in Planet Labs PBC on September 24, 2024 and sell it today you would earn a total of  230.00  from holding Planet Labs PBC or generate 132.18% return on investment over 90 days.

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

GE Aerospace  vs.  Planet Labs PBC

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.

Planet Labs PBC

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Labs PBC are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Planet Labs disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GE Aerospace and Planet Labs

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

The idea behind GE Aerospace and Planet Labs PBC 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.