Correlation Between Compagnie Financire and Geberit AG

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

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

Diversification Opportunities for Compagnie Financire and Geberit AG

0.11

Correlation Coefficient

Compagnie Financire  Geberit AG

Average diversification

The 3 months correlation between Compagnie and Geberit is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Financire Richemont and Geberit AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geberit AG and Compagnie Financire 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 Compagnie Financire Richemont 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 Compagnie Financire i.e., Compagnie Financire and Geberit AG go up and down completely randomly.

Pair Corralation between Compagnie Financire and Geberit AG

Assuming the 90 days trading horizon Compagnie Financire Richemont is expected to generate 1.64 times more return on investment than Geberit AG. However, Compagnie Financire is 1.64 times more volatile than Geberit AG. It trades about 0.13 of its potential returns per unit of risk. Geberit AG is currently generating about -0.02 per unit of risk. If you would invest  11,706  in Compagnie Financire Richemont on September 17, 2024 and sell it today you would earn a total of  1,924  from holding Compagnie Financire Richemont or generate 16.44% return on investment over 90 days.

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

Compagnie Financire Richemont  vs.  Geberit AG

Compagnie Financire

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Financire Richemont are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Compagnie Financire showed solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of fairly stable basic indicators, Geberit AG is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Compagnie Financire and Geberit AG

The main advantage of trading using opposite Compagnie Financire and Geberit AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie Financire 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 Compagnie Financire Richemont 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.