Correlation Between GE Aerospace and Installed

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

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

Diversification Opportunities for GE Aerospace and Installed

0.14

Correlation Coefficient

GE Aerospace  Installed

Average diversification

The 3 months correlation between GE Aerospace and Installed is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Installed Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Installed Building 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 Installed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Installed Building has no effect on the direction of GE Aerospace i.e., GE Aerospace and Installed go up and down completely randomly.

Pair Corralation between GE Aerospace and Installed

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 25.54 times less return on investment than Installed. But when comparing it to its historical volatility, GE Aerospace is 48.2 times less risky than Installed. It trades about 0.14 of its potential returns per unit of risk. Installed Building Products is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,178  in Installed Building Products on September 4, 2024 and sell it today you would earn a total of  97.00  from holding Installed Building Products or generate 1.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	63.37%
Values	Daily Returns

GE Aerospace  vs.  Installed Building Products

GE Aerospace

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, GE Aerospace may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Installed Building

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Installed Building Products has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating 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 Installed Building Products investors.

Pair Trading with GE Aerospace and Installed

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

The idea behind GE Aerospace and Installed Building Products 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.