Can any of the company-specific risk be diversified away by investing in both GE Vernova and Stifel Financial 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 Vernova and Stifel Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GE Vernova LLC and Stifel Financial, you can compare the effects of market volatilities on GE Vernova and Stifel Financial 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 Vernova with a short position of Stifel Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of GE Vernova and Stifel Financial.
Diversification Opportunities for GE Vernova and Stifel Financial
The 3 months correlation between GEV and Stifel is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding GE Vernova LLC and Stifel Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stifel Financial and GE Vernova 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 Vernova LLC are associated (or correlated) with Stifel Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stifel Financial has no effect on the direction of GE Vernova i.e., GE Vernova and Stifel Financial go up and down completely randomly.
Pair Corralation between GE Vernova and Stifel Financial
Considering the 90-day investment horizon GE Vernova LLC is expected to generate 2.91 times more return on investment than Stifel Financial. However, GE Vernova is 2.91 times more volatile than Stifel Financial. It trades about 0.21 of its potential returns per unit of risk. Stifel Financial is currently generating about 0.07 per unit of risk. If you would invest 13,125 in GE Vernova LLC on March 5, 2024 and sell it today you would earn a total of 4,465 from holding GE Vernova LLC or generate 34.02% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in GE Vernova LLC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, GE Vernova showed solid returns over the last few months and may actually be approaching a breakup point.
Compared to the overall equity markets, risk-adjusted returns on investments in Stifel Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Stifel Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.