Correlation Between Capstone Green and General Electric

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Can any of the company-specific risk be diversified away by investing in both Capstone Green and General Electric 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 Capstone Green and General Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capstone Green Energy and General Electric, you can compare the effects of market volatilities on Capstone Green and General Electric 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 Capstone Green with a short position of General Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capstone Green and General Electric.

Diversification Opportunities for Capstone Green and General Electric

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Capstone and General is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Capstone Green Energy and General Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Electric and Capstone Green 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 Capstone Green Energy are associated (or correlated) with General Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Electric has no effect on the direction of Capstone Green i.e., Capstone Green and General Electric go up and down completely randomly.

Pair Corralation between Capstone Green and General Electric

Given the investment horizon of 90 days Capstone Green Energy is expected to under-perform the General Electric. In addition to that, Capstone Green is 2.72 times more volatile than General Electric. It trades about -0.02 of its total potential returns per unit of risk. General Electric is currently generating about 0.01 per unit of volatility. If you would invest  7,974  in General Electric on November 6, 2022 and sell it today you would earn a total of  222.00  from holding General Electric or generate 2.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Capstone Green Energy  vs.  General Electric

 Performance (%) 
       Timeline  
Capstone Green Energy 
Capstone Performance
0 of 100
Over the last 90 days Capstone Green Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Capstone Green is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Capstone Price Channel

General Electric 
General Performance
16 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in General Electric are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, General Electric exhibited solid returns over the last few months and may actually be approaching a breakup point.

General Price Channel

Capstone Green and General Electric Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Capstone Green and General Electric

The main advantage of trading using opposite Capstone Green and General Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capstone Green position performs unexpectedly, General Electric 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 General Electric will offset losses from the drop in General Electric's long position.
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The idea behind Capstone Green Energy and General Electric 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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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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