Correlation Between GE Aerospace and TELEFONICA

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

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

Diversification Opportunities for GE Aerospace and TELEFONICA

-0.16

Correlation Coefficient

GE Aerospace  TELEFONICA

Good diversification

The 3 months correlation between GE Aerospace and TELEFONICA is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and TELEFONICA EMISIONES S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TELEFONICA EMISIONES 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 TELEFONICA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TELEFONICA EMISIONES has no effect on the direction of GE Aerospace i.e., GE Aerospace and TELEFONICA go up and down completely randomly.

Pair Corralation between GE Aerospace and TELEFONICA

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 2.62 times more return on investment than TELEFONICA. However, GE Aerospace is 2.62 times more volatile than TELEFONICA EMISIONES S. It trades about 0.09 of its potential returns per unit of risk. TELEFONICA EMISIONES S is currently generating about -0.06 per unit of risk. If you would invest  16,397  in GE Aerospace on August 31, 2024 and sell it today you would earn a total of  1,663  from holding GE Aerospace or generate 10.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

GE Aerospace  vs.  TELEFONICA EMISIONES S

GE Aerospace

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 7 (%) 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 December 2024.

TELEFONICA EMISIONES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TELEFONICA EMISIONES S has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, TELEFONICA 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 TELEFONICA

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

The idea behind GE Aerospace and TELEFONICA EMISIONES S 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.