Correlation Between Organon and GE HealthCare

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

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

Diversification Opportunities for Organon and GE HealthCare

0.65

Correlation Coefficient

Organon  GE HealthCare

Poor diversification

The 3 months correlation between Organon and GEHC is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Organon Co and GE HealthCare Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE HealthCare Techno and Organon 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 Organon Co are associated (or correlated) with GE HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE HealthCare Techno has no effect on the direction of Organon i.e., Organon and GE HealthCare go up and down completely randomly.

Pair Corralation between Organon and GE HealthCare

Considering the 90-day investment horizon Organon Co is expected to under-perform the GE HealthCare. In addition to that, Organon is 1.45 times more volatile than GE HealthCare Technologies. It trades about -0.01 of its total potential returns per unit of risk. GE HealthCare Technologies is currently generating about 0.01 per unit of volatility. If you would invest  8,169  in GE HealthCare Technologies on September 12, 2024 and sell it today you would earn a total of  67.00  from holding GE HealthCare Technologies or generate 0.82% return on investment over 90 days.

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

Organon Co  vs.  GE HealthCare Technologies

Organon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Organon Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of sluggish performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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.

Pair Trading with Organon and GE HealthCare

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

The idea behind Organon Co and GE HealthCare Technologies 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.