Correlation Between GE Aerospace and Vanguard Growth
Can any of the company-specific risk be diversified away by investing in both GE Aerospace and Vanguard Growth 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 Vanguard Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GE Aerospace and Vanguard Growth Index, you can compare the effects of market volatilities on GE Aerospace and Vanguard Growth 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 Vanguard Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Aerospace and Vanguard Growth.
Diversification Opportunities for GE Aerospace and Vanguard Growth
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GE Aerospace and Vanguard is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Vanguard Growth Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Growth Index 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 Vanguard Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Growth Index has no effect on the direction of GE Aerospace i.e., GE Aerospace and Vanguard Growth go up and down completely randomly.
Pair Corralation between GE Aerospace and Vanguard Growth
Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 2.98 times more return on investment than Vanguard Growth. However, GE Aerospace is 2.98 times more volatile than Vanguard Growth Index. It trades about 0.23 of its potential returns per unit of risk. Vanguard Growth Index is currently generating about -0.17 per unit of risk. If you would invest 13,826 in GE Aerospace on January 26, 2024 and sell it today you would earn a total of 2,093 from holding GE Aerospace or generate 15.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GE Aerospace vs. Vanguard Growth Index
Performance |
| Timeline |
| GE Aerospace |
| Vanguard Growth Index |
GE Aerospace and Vanguard Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GE Aerospace and Vanguard Growth
The main advantage of trading using opposite GE Aerospace and Vanguard Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace position performs unexpectedly, Vanguard Growth 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 Vanguard Growth will offset losses from the drop in Vanguard Growth's long position.The idea behind GE Aerospace and Vanguard Growth Index 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.| Vanguard Growth vs. iShares Small Cap | Vanguard Growth vs. Pacer Cash Cows | Vanguard Growth vs. GXO Logistics | Vanguard Growth vs. Amplify CWP Enhanced |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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