Correlation Between SGS SA and Geberit AG
Can any of the company-specific risk be diversified away by investing in both SGS SA 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 SGS SA and Geberit AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SGS SA and Geberit AG, you can compare the effects of market volatilities on SGS SA 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 SGS SA with a short position of Geberit AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of SGS SA and Geberit AG.
Diversification Opportunities for SGS SA and Geberit AG
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SGS and Geberit is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding SGS SA and Geberit AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geberit AG and SGS SA 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 SGS SA 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 SGS SA i.e., SGS SA and Geberit AG go up and down completely randomly.
Pair Corralation between SGS SA and Geberit AG
Assuming the 90 days trading horizon SGS SA is expected to under-perform the Geberit AG. But the stock apears to be less risky and, when comparing its historical volatility, SGS SA is 1.11 times less risky than Geberit AG. The stock trades about -0.23 of its potential returns per unit of risk. The Geberit AG is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 52,160 in Geberit AG on August 28, 2024 and sell it today you would earn a total of 20.00 from holding Geberit AG or generate 0.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SGS SA vs. Geberit AG
Performance |
| Timeline |
| SGS SA |
| Geberit AG |
SGS SA and Geberit AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SGS SA and Geberit AG
The main advantage of trading using opposite SGS SA and Geberit AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SGS SA 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 SGS SA 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.| Geberit AG vs. Bucher Industries AG | Geberit AG vs. VAT Group AG | Geberit AG vs. OC Oerlikon Corp | Geberit AG vs. Procimmo Real Estate |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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