Correlation Between Swisscom and Geberit AG

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

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

Diversification Opportunities for Swisscom and Geberit AG

0.04

Correlation Coefficient

Swisscom  Geberit AG

Significant diversification

The 3 months correlation between Swisscom and Geberit is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Swisscom AG and Geberit AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geberit AG and Swisscom 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 Swisscom AG 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 Swisscom i.e., Swisscom and Geberit AG go up and down completely randomly.

Pair Corralation between Swisscom and Geberit AG

Assuming the 90 days trading horizon Swisscom AG is expected to under-perform the Geberit AG. But the stock apears to be less risky and, when comparing its historical volatility, Swisscom AG is 1.38 times less risky than Geberit AG. The stock trades about -0.15 of its potential returns per unit of risk. The Geberit AG is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  55,060  in Geberit AG on September 17, 2024 and sell it today you would lose (1,240) from holding Geberit AG or give up 2.25% of portfolio value over 90 days.

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

Swisscom AG  vs.  Geberit AG

Swisscom AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Swisscom AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

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 Swisscom and Geberit AG

The main advantage of trading using opposite Swisscom and Geberit AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swisscom 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 Swisscom AG 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.