Correlation Between Ingersoll Rand and GE Aerospace

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

Diversification Opportunities for Ingersoll Rand and GE Aerospace

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Ingersoll and GE Aerospace is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Ingersoll Rand and GE Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE Aerospace and Ingersoll Rand 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 Ingersoll Rand 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 Ingersoll Rand i.e., Ingersoll Rand and GE Aerospace go up and down completely randomly.

Pair Corralation between Ingersoll Rand and GE Aerospace

Allowing for the 90-day total investment horizon Ingersoll Rand is expected to under-perform the GE Aerospace. But the stock apears to be less risky and, when comparing its historical volatility, Ingersoll Rand is 2.46 times less risky than GE Aerospace. The stock trades about -0.23 of its potential returns per unit of risk. The GE Aerospace is currently generating about 0.2 of returns per unit of risk over similar time horizon. 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 Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.45%
ValuesDaily Returns

Ingersoll Rand  vs.  GE Aerospace

 Performance 
       Timeline  
Ingersoll Rand 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Ingersoll Rand are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Ingersoll Rand may actually be approaching a critical reversion point that can send shares even higher in May 2024.
GE Aerospace 

Risk-Adjusted Performance

28 of 100

 
Weak
 
Strong
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.

Ingersoll Rand and GE Aerospace Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ingersoll Rand and GE Aerospace

The main advantage of trading using opposite Ingersoll Rand and GE Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ingersoll Rand 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 Ingersoll Rand 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.
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 Transaction History module to view history of all your transactions and understand their impact on performance.

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