Correlation Between ABC Arbitrage and Gecina SA

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

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

Diversification Opportunities for ABC Arbitrage and Gecina SA

-0.81

Correlation Coefficient

ABC Arbitrage  Gecina SA

Pay attention - limited upside

The 3 months correlation between ABC and Gecina is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding ABC arbitrage SA and Gecina SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gecina SA and ABC Arbitrage 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 ABC arbitrage SA are associated (or correlated) with Gecina SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gecina SA has no effect on the direction of ABC Arbitrage i.e., ABC Arbitrage and Gecina SA go up and down completely randomly.

Pair Corralation between ABC Arbitrage and Gecina SA

Assuming the 90 days trading horizon ABC arbitrage SA is expected to generate 1.04 times more return on investment than Gecina SA. However, ABC Arbitrage is 1.04 times more volatile than Gecina SA. It trades about 0.1 of its potential returns per unit of risk. Gecina SA is currently generating about -0.22 per unit of risk. If you would invest  437.00  in ABC arbitrage SA on September 17, 2024 and sell it today you would earn a total of  35.00  from holding ABC arbitrage SA or generate 8.01% return on investment over 90 days.

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

ABC arbitrage SA  vs.  Gecina SA

ABC arbitrage SA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ABC arbitrage SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ABC Arbitrage may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Gecina SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gecina SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ABC Arbitrage and Gecina SA

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

The idea behind ABC arbitrage SA and Gecina SA 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.