Correlation Between General Electric and Durango Resources

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

Diversification Opportunities for General Electric and Durango Resources

-0.07
  Correlation Coefficient

Good diversification

The 3 months correlation between General and Durango is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding General Electric and Durango Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Durango Resources 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 Durango Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Durango Resources has no effect on the direction of General Electric i.e., General Electric and Durango Resources go up and down completely randomly.

Pair Corralation between General Electric and Durango Resources

Allowing for the 90-day total investment horizon General Electric is expected to generate 16.83 times less return on investment than Durango Resources. But when comparing it to its historical volatility, General Electric is 4.01 times less risky than Durango Resources. It trades about 0.01 of its potential returns per unit of risk. Durango Resources is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Durango Resources on September 2, 2022 and sell it today you would lose (2.79)  from holding Durango Resources or give up 39.86% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

General Electric  vs.  Durango Resources

 Performance (%) 
       Timeline  
General Electric 
General Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in General Electric are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, General Electric exhibited solid returns over the last few months and may actually be approaching a breakup point.

General Price Channel

Durango Resources 
Durango Performance
0 of 100
Over the last 90 days Durango Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Durango Resources is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Durango Price Channel

General Electric and Durango Resources Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with General Electric and Durango Resources

The main advantage of trading using opposite General Electric and Durango Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Electric position performs unexpectedly, Durango Resources 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 Durango Resources will offset losses from the drop in Durango Resources' long position.
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The idea behind General Electric and Durango Resources 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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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 CEO Directory module to screen CEOs from public companies around the world.

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