Correlation Between General Electric and Sapmer

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

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

Diversification Opportunities for General Electric and Sapmer

-0.18

Correlation Coefficient

General Electric  Sapmer

Good diversification

The 3 months correlation between General and Sapmer is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding General Electric and Sapmer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sapmer and General Electric 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 General Electric are associated (or correlated) with Sapmer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sapmer has no effect on the direction of General Electric i.e., General Electric and Sapmer go up and down completely randomly.

Pair Corralation between General Electric and Sapmer

Assuming the 90 days trading horizon General Electric is expected to generate 0.76 times more return on investment than Sapmer. However, General Electric is 1.32 times less risky than Sapmer. It trades about 0.35 of its potential returns per unit of risk. Sapmer is currently generating about 0.17 per unit of risk. If you would invest  13,376  in General Electric on February 1, 2024 and sell it today you would earn a total of  2,124  from holding General Electric or generate 15.88% return on investment over 90 days.

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

General Electric  vs.  Sapmer

General Electric

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in General Electric are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, General Electric sustained solid returns over the last few months and may actually be approaching a breakup point.

Sapmer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sapmer has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with General Electric and Sapmer

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

The idea behind General Electric and Sapmer 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.