Correlation Between GE Aerospace and Dover

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

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

Diversification Opportunities for GE Aerospace and Dover

0.71

Correlation Coefficient

GE Aerospace  Dover

Poor diversification

The 3 months correlation between GE Aerospace and Dover is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Dover in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dover 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 Dover. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dover has no effect on the direction of GE Aerospace i.e., GE Aerospace and Dover go up and down completely randomly.

Pair Corralation between GE Aerospace and Dover

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 3.52 times less return on investment than Dover. In addition to that, GE Aerospace is 1.89 times more volatile than Dover. It trades about 0.03 of its total potential returns per unit of risk. Dover is currently generating about 0.18 per unit of volatility. If you would invest  17,849  in Dover on March 4, 2024 and sell it today you would earn a total of  533.00  from holding Dover or generate 2.99% 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.  Dover

GE Aerospace

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 15 (%) 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.

Dover

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dover are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Dover may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with GE Aerospace and Dover

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

The idea behind GE Aerospace and Dover 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.