Correlation Between Geberit AG and DAIKIN INDUSTRUNSPADR

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

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

Diversification Opportunities for Geberit AG and DAIKIN INDUSTRUNSPADR

0.39

Correlation Coefficient

Geberit AG  DAIKIN INDUSTRUNSPADR

Weak diversification

The 3 months correlation between Geberit and DAIKIN is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Geberit AG and DAIKIN INDUSTRUNSPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAIKIN INDUSTRUNSPADR and Geberit AG 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 Geberit AG are associated (or correlated) with DAIKIN INDUSTRUNSPADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAIKIN INDUSTRUNSPADR has no effect on the direction of Geberit AG i.e., Geberit AG and DAIKIN INDUSTRUNSPADR go up and down completely randomly.

Pair Corralation between Geberit AG and DAIKIN INDUSTRUNSPADR

Assuming the 90 days trading horizon Geberit AG is expected to under-perform the DAIKIN INDUSTRUNSPADR. But the stock apears to be less risky and, when comparing its historical volatility, Geberit AG is 1.03 times less risky than DAIKIN INDUSTRUNSPADR. The stock trades about -0.04 of its potential returns per unit of risk. The DAIKIN INDUSTRUNSPADR is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,098  in DAIKIN INDUSTRUNSPADR on September 22, 2024 and sell it today you would lose (28.00) from holding DAIKIN INDUSTRUNSPADR or give up 2.55% of portfolio value over 90 days.

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

Geberit AG  vs.  DAIKIN INDUSTRUNSPADR

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.

DAIKIN INDUSTRUNSPADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Geberit AG and DAIKIN INDUSTRUNSPADR

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

The idea behind Geberit AG and DAIKIN INDUSTRUNSPADR 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.