Correlation Between GE Aerospace and PVA TePla
Can any of the company-specific risk be diversified away by investing in both GE Aerospace and PVA TePla 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 PVA TePla into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GE Aerospace and PVA TePla AG, you can compare the effects of market volatilities on GE Aerospace and PVA TePla 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 PVA TePla. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Aerospace and PVA TePla.
Diversification Opportunities for GE Aerospace and PVA TePla
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GE Aerospace and PVA is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and PVA TePla AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PVA TePla AG 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 PVA TePla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PVA TePla AG has no effect on the direction of GE Aerospace i.e., GE Aerospace and PVA TePla go up and down completely randomly.
Pair Corralation between GE Aerospace and PVA TePla
Allowing for the 90-day total investment horizon GE Aerospace is expected to under-perform the PVA TePla. But the stock apears to be less risky and, when comparing its historical volatility, GE Aerospace is 1.56 times less risky than PVA TePla. The stock trades about -0.08 of its potential returns per unit of risk. The PVA TePla AG is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 1,623 in PVA TePla AG on September 25, 2024 and sell it today you would lose (177.00) from holding PVA TePla AG or give up 10.91% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.44% |
Values | Daily Returns |
GE Aerospace vs. PVA TePla AG
Performance |
Timeline |
GE Aerospace |
PVA TePla AG |
GE Aerospace and PVA TePla Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GE Aerospace and PVA TePla
The main advantage of trading using opposite GE Aerospace and PVA TePla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace position performs unexpectedly, PVA TePla 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 PVA TePla will offset losses from the drop in PVA TePla's long position.GE Aerospace vs. Illinois Tool Works | GE Aerospace vs. Dover | GE Aerospace vs. Cummins | GE Aerospace vs. Eaton PLC |
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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