Correlation Between Geberit AG and Holcim AG

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

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

Diversification Opportunities for Geberit AG and Holcim AG

-0.18

Correlation Coefficient

Geberit AG  Holcim AG

Good diversification

The 3 months correlation between Geberit and Holcim is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Geberit AG and Holcim AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holcim AG 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 Holcim AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holcim AG has no effect on the direction of Geberit AG i.e., Geberit AG and Holcim AG go up and down completely randomly.

Pair Corralation between Geberit AG and Holcim AG

Assuming the 90 days trading horizon Geberit AG is expected to generate 1.04 times more return on investment than Holcim AG. However, Geberit AG is 1.04 times more volatile than Holcim AG. It trades about 0.14 of its potential returns per unit of risk. Holcim AG is currently generating about 0.1 per unit of risk. If you would invest  52,220  in Geberit AG on September 17, 2024 and sell it today you would earn a total of  1,600  from holding Geberit AG or generate 3.06% return on investment over 90 days.

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

Geberit AG  vs.  Holcim 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.

Holcim AG

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Holcim AG are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Holcim AG may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Geberit AG and Holcim AG

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

The idea behind Geberit AG and Holcim 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.