Correlation Between GE Aerospace and AOI Electronics

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

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

Diversification Opportunities for GE Aerospace and AOI Electronics

0.14

Correlation Coefficient

GE Aerospace  AOI Electronics

Average diversification

The 3 months correlation between GE Aerospace and AOI is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and AOI Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AOI Electronics 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 AOI Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AOI Electronics has no effect on the direction of GE Aerospace i.e., GE Aerospace and AOI Electronics go up and down completely randomly.

Pair Corralation between GE Aerospace and AOI Electronics

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 0.06 times more return on investment than AOI Electronics. However, GE Aerospace is 16.96 times less risky than AOI Electronics. It trades about 0.27 of its potential returns per unit of risk. AOI Electronics Co is currently generating about -0.12 per unit of risk. If you would invest  9,691  in GE Aerospace on February 28, 2024 and sell it today you would earn a total of  7,042  from holding GE Aerospace or generate 72.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

GE Aerospace  vs.  AOI Electronics Co

GE Aerospace

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, GE Aerospace exhibited solid returns over the last few months and may actually be approaching a breakup point.

AOI Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AOI Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with GE Aerospace and AOI Electronics

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

The idea behind GE Aerospace and AOI Electronics Co 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.