Correlation Between 345370BN9 and General Electric

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Can any of the company-specific risk be diversified away by investing in both 345370BN9 and General Electric 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 345370BN9 and General Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FORD MTR DEL and General Electric, you can compare the effects of market volatilities on 345370BN9 and General Electric 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 345370BN9 with a short position of General Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of 345370BN9 and General Electric.

Diversification Opportunities for 345370BN9 and General Electric

0.15
  Correlation Coefficient

Average diversification

The 3 months correlation between 345370BN9 and General is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding FORD MTR CO DEL 7.125% 15Nov20 and General Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Electric and 345370BN9 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 FORD MTR DEL are associated (or correlated) with General Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Electric has no effect on the direction of 345370BN9 i.e., 345370BN9 and General Electric go up and down completely randomly.

Pair Corralation between 345370BN9 and General Electric

Assuming the 90 days trading horizon 345370BN9 is expected to generate 8.66 times less return on investment than General Electric. But when comparing it to its historical volatility, FORD MTR DEL is 1.35 times less risky than General Electric. It trades about 0.03 of its potential returns per unit of risk. General Electric is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  9,485  in General Electric on December 30, 2023 and sell it today you would earn a total of  8,068  from holding General Electric or generate 85.06% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy93.55%
ValuesDaily Returns

FORD MTR CO DEL 7.125% 15Nov20  vs.  General Electric

 Performance 
       Timeline  
FORD MTR DEL 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in FORD MTR DEL are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 345370BN9 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
General Electric 

Risk-Adjusted Performance

33 of 100

 
Low
 
High
Very Strong
Compared to the overall equity markets, risk-adjusted returns on investments in General Electric are ranked lower than 33 (%) 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.

345370BN9 and General Electric Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with 345370BN9 and General Electric

The main advantage of trading using opposite 345370BN9 and General Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 345370BN9 position performs unexpectedly, General Electric 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 General Electric will offset losses from the drop in General Electric's long position.
The idea behind FORD MTR DEL and General Electric 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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