Correlation Between Carrier Global and Geberit AG

Can any of the company-specific risk be diversified away by investing in both Carrier Global and Geberit AG 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 Carrier Global and Geberit AG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Carrier Global and Geberit AG, you can compare the effects of market volatilities on Carrier Global and Geberit AG 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 Carrier Global with a short position of Geberit AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carrier Global and Geberit AG.

Diversification Opportunities for Carrier Global and Geberit AG

0.07

Correlation Coefficient

Carrier Global  Geberit AG

Significant diversification

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

Pair Corralation between Carrier Global and Geberit AG

Assuming the 90 days horizon Carrier Global is expected to under-perform the Geberit AG. In addition to that, Carrier Global is 1.15 times more volatile than Geberit AG. It trades about -0.07 of its total potential returns per unit of risk. Geberit AG is currently generating about -0.04 per unit of volatility. If you would invest  5,700  in Geberit AG on September 22, 2024 and sell it today you would lose (300.00) from holding Geberit AG or give up 5.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Carrier Global  vs.  Geberit AG

Carrier Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carrier Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Geberit AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Geberit AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Geberit AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Carrier Global and Geberit AG

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

The idea behind Carrier Global and Geberit AG 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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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 the Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .