Correlation Between General Electric and Western Asset

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both General Electric and Western Asset 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 Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Electric and Western Asset High, you can compare the effects of market volatilities on General Electric and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Electric and Western Asset.

Diversification Opportunities for General Electric and Western Asset

0.82
  Correlation Coefficient

Very poor diversification

The 13 months correlation between General and Western is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding General Electric and Western Asset High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset High 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset High has no effect on the direction of General Electric i.e., General Electric and Western Asset go up and down completely randomly.

Pair Corralation between General Electric and Western Asset

Allowing for the 90-day total investment horizon General Electric is expected to generate 2.15 times more return on investment than Western Asset. However, General Electric is 2.15 times more volatile than Western Asset High. It trades about 0.23 of its potential returns per unit of risk. Western Asset High is currently generating about 0.04 per unit of risk. If you would invest  6,611  in General Electric on December 29, 2023 and sell it today you would earn a total of  11,401  from holding General Electric or generate 172.45% return on investment over 90 days.
Time Period13 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.68%
ValuesDaily Returns

General Electric  vs.  Western Asset High

 Performance 
       Timeline  
General Electric 

Risk-Adjusted Performance

15 of 100

 
Low
 
High
Very Strong
Compared to the overall equity markets, risk-adjusted returns on investments in General Electric are ranked lower than 15 (%) 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.
Western Asset High 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset High are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Western Asset is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

General Electric and Western Asset Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with General Electric and Western Asset

The main advantage of trading using opposite General Electric and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Electric position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.
The idea behind General Electric and Western Asset High 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

Other Complementary Tools

Watchlist Optimization
Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm
Portfolio Suggestion
Get suggestions outside of your existing asset allocation including your own model portfolios
Odds Of Bankruptcy
Get analysis of equity chance of financial distress in the next 2 years
Content Syndication
Quickly integrate customizable finance content to your own investment portal
USA ETFs
Find actively traded Exchange Traded Funds (ETF) in USA
AI Investment Finder
Use AI to screen and filter profitable investment opportunities
Top Crypto Exchanges
Search and analyze digital assets across top global cryptocurrency exchanges