Correlation Between CommScope Holding and GE Aerospace

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

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

Diversification Opportunities for CommScope Holding and GE Aerospace

-0.73

Correlation Coefficient

CommScope Holding  GE Aerospace

Pay attention - limited upside

The 3 months correlation between CommScope and GE Aerospace is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding CommScope Holding Co and GE Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE Aerospace and CommScope Holding 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 CommScope Holding Co are associated (or correlated) with GE Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE Aerospace has no effect on the direction of CommScope Holding i.e., CommScope Holding and GE Aerospace go up and down completely randomly.

Pair Corralation between CommScope Holding and GE Aerospace

Given the investment horizon of 90 days CommScope Holding Co is expected to under-perform the GE Aerospace. In addition to that, CommScope Holding is 1.49 times more volatile than GE Aerospace. It trades about -0.46 of its total potential returns per unit of risk. GE Aerospace is currently generating about 0.2 per unit of volatility. If you would invest  13,856  in GE Aerospace on January 20, 2024 and sell it today you would earn a total of  1,438  from holding GE Aerospace or generate 10.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

CommScope Holding Co  vs.  GE Aerospace

CommScope Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CommScope Holding Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

GE Aerospace

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 28 (%) 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.

Pair Trading with CommScope Holding and GE Aerospace

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

The idea behind CommScope Holding Co and GE Aerospace 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.