Correlation Between GE Aerospace and Hillenbrand

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

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

Diversification Opportunities for GE Aerospace and Hillenbrand

0.65

Correlation Coefficient

GE Aerospace  Hillenbrand

Poor diversification

The 3 months correlation between GE Aerospace and Hillenbrand is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Hillenbrand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hillenbrand 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 Hillenbrand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hillenbrand has no effect on the direction of GE Aerospace i.e., GE Aerospace and Hillenbrand go up and down completely randomly.

Pair Corralation between GE Aerospace and Hillenbrand

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 0.86 times more return on investment than Hillenbrand. However, GE Aerospace is 1.16 times less risky than Hillenbrand. It trades about 0.2 of its potential returns per unit of risk. Hillenbrand is currently generating about 0.02 per unit of risk. If you would invest  6,723  in GE Aerospace on January 24, 2024 and sell it today you would earn a total of  9,539  from holding GE Aerospace or generate 141.89% 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.  Hillenbrand

GE Aerospace

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, GE Aerospace exhibited solid returns over the last few months and may actually be approaching a breakup point.

Hillenbrand

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hillenbrand are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Hillenbrand may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with GE Aerospace and Hillenbrand

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

The idea behind GE Aerospace and Hillenbrand 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.