Correlation Between GE Aerospace and Advanced Voice

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

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

Diversification Opportunities for GE Aerospace and Advanced Voice

0.57

Correlation Coefficient

GE Aerospace  Advanced Voice

Very weak diversification

The 3 months correlation between GE Aerospace and Advanced is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Advanced Voice Recognition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Voice Recog 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 Advanced Voice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Voice Recog has no effect on the direction of GE Aerospace i.e., GE Aerospace and Advanced Voice go up and down completely randomly.

Pair Corralation between GE Aerospace and Advanced Voice

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 2.62 times less return on investment than Advanced Voice. But when comparing it to its historical volatility, GE Aerospace is 8.3 times less risky than Advanced Voice. It trades about 0.25 of its potential returns per unit of risk. Advanced Voice Recognition is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  60.00  in Advanced Voice Recognition on February 16, 2024 and sell it today you would lose (1.00) from holding Advanced Voice Recognition or give up 1.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

GE Aerospace  vs.  Advanced Voice Recognition

GE Aerospace

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, GE Aerospace exhibited solid returns over the last few months and may actually be approaching a breakup point.

Advanced Voice Recog

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Voice Recognition are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, Advanced Voice demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GE Aerospace and Advanced Voice

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

The idea behind GE Aerospace and Advanced Voice Recognition 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.

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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.