Correlation Between GE Aerospace and Pure Storage

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

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

Diversification Opportunities for GE Aerospace and Pure Storage

0.57

Correlation Coefficient

GE Aerospace  Pure Storage

Very weak diversification

The 3 months correlation between GE Aerospace and Pure is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Pure Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Storage 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 Pure Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Storage has no effect on the direction of GE Aerospace i.e., GE Aerospace and Pure Storage go up and down completely randomly.

Pair Corralation between GE Aerospace and Pure Storage

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 2.65 times less return on investment than Pure Storage. In addition to that, GE Aerospace is 1.05 times more volatile than Pure Storage. It trades about 0.14 of its total potential returns per unit of risk. Pure Storage is currently generating about 0.39 per unit of volatility. If you would invest  5,051  in Pure Storage on February 21, 2024 and sell it today you would earn a total of  961.00  from holding Pure Storage or generate 19.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

GE Aerospace  vs.  Pure Storage

GE Aerospace

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, GE Aerospace exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pure Storage

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pure Storage are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Pure Storage reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GE Aerospace and Pure Storage

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

The idea behind GE Aerospace and Pure Storage 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.