Correlation Between GE Aerospace and Advanced Biomedical

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

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

Diversification Opportunities for GE Aerospace and Advanced Biomedical

-0.49

Correlation Coefficient

GE Aerospace  Advanced Biomedical

Very good diversification

The 3 months correlation between GE Aerospace and Advanced is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Advanced Biomedical Technologi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Biomedical 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 Advanced Biomedical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Biomedical has no effect on the direction of GE Aerospace i.e., GE Aerospace and Advanced Biomedical go up and down completely randomly.

Pair Corralation between GE Aerospace and Advanced Biomedical

If you would invest  0.00  in Advanced Biomedical Technologies on March 5, 2024 and sell it today you would earn a total of  0.00  from holding Advanced Biomedical Technologies or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	5.0%
Values	Daily Returns

GE Aerospace  vs.  Advanced Biomedical Technologi

GE Aerospace

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 16 (%) 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.

Advanced Biomedical

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Advanced Biomedical Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively weak primary indicators, Advanced Biomedical unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GE Aerospace and Advanced Biomedical

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

The idea behind GE Aerospace and Advanced Biomedical Technologies 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.