Correlation Between GE HealthCare and Warner Bros

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

By analyzing existing cross correlation between GE HealthCare Technologies and Warner Bros Discovery, you can compare the effects of market volatilities on GE HealthCare and Warner Bros 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 HealthCare with a short position of Warner Bros. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE HealthCare and Warner Bros.

Diversification Opportunities for GE HealthCare and Warner Bros

-0.59

Correlation Coefficient

GE HealthCare  Warner Bros

Excellent diversification

The 3 months correlation between GEHC and Warner is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding GE HealthCare Technologies and Warner Bros Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warner Bros Discovery and GE HealthCare 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 HealthCare Technologies are associated (or correlated) with Warner Bros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warner Bros Discovery has no effect on the direction of GE HealthCare i.e., GE HealthCare and Warner Bros go up and down completely randomly.

Pair Corralation between GE HealthCare and Warner Bros

Given the investment horizon of 90 days GE HealthCare Technologies is expected to under-perform the Warner Bros. But the stock apears to be less risky and, when comparing its historical volatility, GE HealthCare Technologies is 2.38 times less risky than Warner Bros. The stock trades about -0.17 of its potential returns per unit of risk. The Warner Bros Discovery is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  778.00  in Warner Bros Discovery on September 4, 2024 and sell it today you would earn a total of  278.00  from holding Warner Bros Discovery or generate 35.73% return on investment over 90 days.

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

GE HealthCare Technologies  vs.  Warner Bros Discovery

GE HealthCare Techno

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GE HealthCare Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, GE HealthCare is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Warner Bros Discovery

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Bros Discovery are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, Warner Bros exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GE HealthCare and Warner Bros

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

The idea behind GE HealthCare Technologies and Warner Bros Discovery 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.