Correlation Between General Electric and Alfi

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

Diversification Opportunities for General Electric and Alfi

0.05
  Correlation Coefficient

Significant diversification

The 3 months correlation between General and Alfi is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding General Electric and Alfi Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfi Inc and General Electric 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 General Electric are associated (or correlated) with Alfi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfi Inc has no effect on the direction of General Electric i.e., General Electric and Alfi go up and down completely randomly.

Pair Corralation between General Electric and Alfi

Allowing for the 90-day total investment horizon General Electric is expected to generate 3.17 times less return on investment than Alfi. But when comparing it to its historical volatility, General Electric is 2.04 times less risky than Alfi. It trades about 0.05 of its potential returns per unit of risk. Alfi Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  125.00  in Alfi Inc on May 13, 2022 and sell it today you would earn a total of  19.00  from holding Alfi Inc or generate 15.2% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy98.39%
ValuesDaily Returns

General Electric  vs.  Alfi Inc

 Performance (%) 
       Timeline  
General Electric 
General Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in General Electric are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sluggish technical and fundamental indicators, General Electric may actually be approaching a critical reversion point that can send shares even higher in September 2022.

General Price Channel

Alfi Inc 
Alfi Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Alfi Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Alfi exhibited solid returns over the last few months and may actually be approaching a breakup point.

Alfi Price Channel

General Electric and Alfi Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with General Electric and Alfi

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

General Electric

Pair trading matchups for General Electric

The idea behind General Electric and Alfi Inc 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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