Correlation Between General Electric and Healthequity

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

Diversification Opportunities for General Electric and Healthequity

-0.19
  Correlation Coefficient

Good diversification

The 3 months correlation between General and Healthequity is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding General Electric and Healthequity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthequity 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 Healthequity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthequity has no effect on the direction of General Electric i.e., General Electric and Healthequity go up and down completely randomly.

Pair Corralation between General Electric and Healthequity

Allowing for the 90-day total investment horizon General Electric is expected to generate 0.77 times more return on investment than Healthequity. However, General Electric is 1.3 times less risky than Healthequity. It trades about 0.05 of its potential returns per unit of risk. Healthequity is currently generating about 0.02 per unit of risk. If you would invest  5,231  in General Electric on May 17, 2022 and sell it today you would earn a total of  2,742  from holding General Electric or generate 52.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

General Electric  vs.  Healthequity

 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 sound technical and fundamental indicators, General Electric is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

General Price Channel

Healthequity 
Healthequity Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Healthequity are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Healthequity is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Healthequity Price Channel

General Electric and Healthequity Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with General Electric and Healthequity

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

General Electric

Pair trading matchups for General Electric

The idea behind General Electric and Healthequity 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.

Healthequity

Pair trading matchups for Healthequity

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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