Correlation Between General Electric and US Bancorp

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

Diversification Opportunities for General Electric and US Bancorp

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between General and US Bancorp is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding General Electric and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of General Electric i.e., General Electric and US Bancorp go up and down completely randomly.

Pair Corralation between General Electric and US Bancorp

Allowing for the 90-day total investment horizon General Electric is expected to under-perform the US Bancorp. In addition to that, General Electric is 1.03 times more volatile than US Bancorp. It trades about -0.41 of its total potential returns per unit of risk. US Bancorp is currently generating about -0.3 per unit of volatility. If you would invest  4,534  in US Bancorp on July 3, 2022 and sell it today you would lose (502.00)  from holding US Bancorp or give up 11.07% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

General Electric  vs.  US Bancorp

 Performance (%) 
       Timeline  
General Electric 
General Performance
0 of 100
Over the last 90 days General Electric has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, General Electric is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

General Price Channel

US Bancorp 
US Bancorp Performance
0 of 100
Over the last 90 days US Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

US Bancorp Price Channel

General Electric and US Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with General Electric and US Bancorp

The main advantage of trading using opposite General Electric and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Electric position performs unexpectedly, US Bancorp 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 US Bancorp will offset losses from the drop in US Bancorp's long position.
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The idea behind General Electric and US Bancorp 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.
US Bancorp vs. Amazon Inc
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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