Correlation Between GE Aerospace and BNY Mellon

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

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

Diversification Opportunities for GE Aerospace and BNY Mellon

0.68

Correlation Coefficient

GE Aerospace  BNY Mellon

Poor diversification

The 3 months correlation between GE Aerospace and BNY is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and BNY Mellon ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNY Mellon ETF 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 BNY Mellon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNY Mellon ETF has no effect on the direction of GE Aerospace i.e., GE Aerospace and BNY Mellon go up and down completely randomly.

Pair Corralation between GE Aerospace and BNY Mellon

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 1.69 times more return on investment than BNY Mellon. However, GE Aerospace is 1.69 times more volatile than BNY Mellon ETF. It trades about 0.1 of its potential returns per unit of risk. BNY Mellon ETF is currently generating about 0.03 per unit of risk. If you would invest  16,397  in GE Aerospace on September 3, 2024 and sell it today you would earn a total of  1,819  from holding GE Aerospace or generate 11.09% return on investment over 90 days.

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

GE Aerospace  vs.  BNY Mellon ETF

GE Aerospace

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, GE Aerospace may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BNY Mellon ETF

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BNY Mellon ETF are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, BNY Mellon is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with GE Aerospace and BNY Mellon

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

The idea behind GE Aerospace and BNY Mellon ETF 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..