Correlation Between General Electric and Moderna

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

Diversification Opportunities for General Electric and Moderna

-0.08
  Correlation Coefficient

Good diversification

The 3 months correlation between General and Moderna is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding General Electric and Moderna in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderna 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 Moderna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderna has no effect on the direction of General Electric i.e., General Electric and Moderna go up and down completely randomly.

Pair Corralation between General Electric and Moderna

Allowing for the 90-day total investment horizon General Electric is expected to generate 2.05 times less return on investment than Moderna. But when comparing it to its historical volatility, General Electric is 1.92 times less risky than Moderna. It trades about 0.17 of its potential returns per unit of risk. Moderna is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  12,853  in Moderna on May 16, 2022 and sell it today you would earn a total of  4,265  from holding Moderna or generate 33.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

General Electric  vs.  Moderna

 Performance (%) 
       Timeline  
General Electric 
General Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in General Electric are ranked lower than 4 (%) 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

Moderna 
Moderna Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Moderna are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat sluggish basic indicators, Moderna sustained solid returns over the last few months and may actually be approaching a breakup point.

Moderna Price Channel

General Electric and Moderna Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with General Electric and Moderna

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

General Electric

Pair trading matchups for General Electric

The idea behind General Electric and Moderna 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.

Moderna

Pair trading matchups for Moderna

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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