Correlation Between Genuine Parts and General Electric

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

Diversification Opportunities for Genuine Parts and General Electric

0.5
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Genuine and General is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Genuine Parts and General Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Electric and Genuine Parts 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 Genuine Parts are associated (or correlated) with General Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Electric has no effect on the direction of Genuine Parts i.e., Genuine Parts and General Electric go up and down completely randomly.

Pair Corralation between Genuine Parts and General Electric

Considering the 90-day investment horizon Genuine Parts is expected to generate 0.69 times more return on investment than General Electric. However, Genuine Parts is 1.45 times less risky than General Electric. It trades about 0.08 of its potential returns per unit of risk. General Electric is currently generating about 0.05 per unit of risk. If you would invest  8,964  in Genuine Parts on May 20, 2022 and sell it today you would earn a total of  7,033  from holding Genuine Parts or generate 78.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Genuine Parts  vs.  General Electric

 Performance (%) 
       Timeline  
Genuine Parts 
Genuine Performance
20 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Genuine Parts are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Genuine Parts sustained solid returns over the last few months and may actually be approaching a breakup point.

Genuine Price Channel

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 inconsistent 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

Genuine Parts and General Electric Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Genuine Parts and General Electric

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

General Electric

Pair trading matchups for General Electric

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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