Correlation Between GE Aerospace and Premium Nickel

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

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

Diversification Opportunities for GE Aerospace and Premium Nickel

0.62

Correlation Coefficient

GE Aerospace  Premium Nickel

Poor diversification

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

Pair Corralation between GE Aerospace and Premium Nickel

Allowing for the 90-day total investment horizon GE Aerospace is expected to under-perform the Premium Nickel. But the stock apears to be less risky and, when comparing its historical volatility, GE Aerospace is 2.84 times less risky than Premium Nickel. The stock trades about -0.06 of its potential returns per unit of risk. The Premium Nickel Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  37.00  in Premium Nickel Resources on September 15, 2024 and sell it today you would lose (1.00) from holding Premium Nickel Resources or give up 2.7% of portfolio value over 90 days.

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

GE Aerospace  vs.  Premium Nickel Resources

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.

Premium Nickel Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Premium Nickel Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Premium Nickel is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GE Aerospace and Premium Nickel

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

The idea behind GE Aerospace and Premium Nickel Resources 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.