Correlation Between Geberit AG and Bucher Industries

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

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

Diversification Opportunities for Geberit AG and Bucher Industries

0.54

Correlation Coefficient

Geberit AG  Bucher Industries

Very weak diversification

The 3 months correlation between Geberit and Bucher is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Geberit AG and Bucher Industries AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bucher Industries 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 Bucher Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bucher Industries has no effect on the direction of Geberit AG i.e., Geberit AG and Bucher Industries go up and down completely randomly.

Pair Corralation between Geberit AG and Bucher Industries

Assuming the 90 days trading horizon Geberit AG is expected to generate 1.34 times more return on investment than Bucher Industries. However, Geberit AG is 1.34 times more volatile than Bucher Industries AG. It trades about 0.05 of its potential returns per unit of risk. Bucher Industries AG is currently generating about -0.12 per unit of risk. If you would invest  51,800  in Geberit AG on August 30, 2024 and sell it today you would earn a total of  720.00  from holding Geberit AG or generate 1.39% return on investment over 90 days.

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

Geberit AG  vs.  Bucher Industries AG

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.

Bucher Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bucher Industries AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Bucher Industries 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 Geberit AG and Bucher Industries

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

The idea behind Geberit AG and Bucher Industries 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 Transaction History module to view history of all your transactions and understand their impact on performance.