Correlation Between Geberit AG and BVZ Holding

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Can any of the company-specific risk be diversified away by investing in both Geberit AG and BVZ Holding 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 BVZ Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Geberit AG and BVZ Holding AG, you can compare the effects of market volatilities on Geberit AG and BVZ Holding 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 BVZ Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Geberit AG and BVZ Holding.

Diversification Opportunities for Geberit AG and BVZ Holding

0.33
  Correlation Coefficient

Weak diversification

The 3 months correlation between Geberit and BVZ is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Geberit AG and BVZ Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BVZ Holding 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 BVZ Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BVZ Holding AG has no effect on the direction of Geberit AG i.e., Geberit AG and BVZ Holding go up and down completely randomly.

Pair Corralation between Geberit AG and BVZ Holding

Assuming the 90 days trading horizon Geberit AG is expected to generate 1.24 times more return on investment than BVZ Holding. However, Geberit AG is 1.24 times more volatile than BVZ Holding AG. It trades about 0.13 of its potential returns per unit of risk. BVZ Holding AG is currently generating about -0.06 per unit of risk. If you would invest  53,300  in Geberit AG on September 5, 2024 and sell it today you would earn a total of  1,700  from holding Geberit AG or generate 3.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy86.96%
ValuesDaily Returns

Geberit AG  vs.  BVZ Holding AG

 Performance 
       Timeline  
Geberit AG 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Geberit AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.
BVZ Holding AG 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BVZ Holding AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, BVZ Holding is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Geberit AG and BVZ Holding Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Geberit AG and BVZ Holding

The main advantage of trading using opposite Geberit AG and BVZ Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Geberit AG position performs unexpectedly, BVZ Holding 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 BVZ Holding will offset losses from the drop in BVZ Holding's long position.
The idea behind Geberit AG and BVZ Holding 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.
Check out your portfolio center.
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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