Correlation Between Gelsenwasser and ESSILORLUXOTTICA

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

By analyzing existing cross correlation between Gelsenwasser AG and ESSILORLUXOTTICA 12ON, you can compare the effects of market volatilities on Gelsenwasser and ESSILORLUXOTTICA 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 Gelsenwasser with a short position of ESSILORLUXOTTICA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gelsenwasser and ESSILORLUXOTTICA.

Diversification Opportunities for Gelsenwasser and ESSILORLUXOTTICA

-0.42

Correlation Coefficient

Gelsenwasser  ESSILORLUXOTTICA

Very good diversification

The 3 months correlation between Gelsenwasser and ESSILORLUXOTTICA is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Gelsenwasser AG and ESSILORLUXOTTICA 12ON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESSILORLUXOTTICA 12ON and Gelsenwasser 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 Gelsenwasser AG are associated (or correlated) with ESSILORLUXOTTICA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESSILORLUXOTTICA 12ON has no effect on the direction of Gelsenwasser i.e., Gelsenwasser and ESSILORLUXOTTICA go up and down completely randomly.

Pair Corralation between Gelsenwasser and ESSILORLUXOTTICA

Assuming the 90 days horizon Gelsenwasser AG is expected to under-perform the ESSILORLUXOTTICA. In addition to that, Gelsenwasser is 1.84 times more volatile than ESSILORLUXOTTICA 12ON. It trades about -0.05 of its total potential returns per unit of risk. ESSILORLUXOTTICA 12ON is currently generating about 0.08 per unit of volatility. If you would invest  10,600  in ESSILORLUXOTTICA 12ON on September 3, 2024 and sell it today you would earn a total of  700.00  from holding ESSILORLUXOTTICA 12ON or generate 6.6% return on investment over 90 days.

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

Gelsenwasser AG  vs.  ESSILORLUXOTTICA 12ON

Gelsenwasser AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gelsenwasser AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

ESSILORLUXOTTICA 12ON

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ESSILORLUXOTTICA 12ON are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, ESSILORLUXOTTICA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gelsenwasser and ESSILORLUXOTTICA

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

The idea behind Gelsenwasser AG and ESSILORLUXOTTICA 12ON 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.