Correlation Between GECI International and Munic SA

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

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

Diversification Opportunities for GECI International and Munic SA

-0.33

Correlation Coefficient

GECI International  Munic SA

Very good diversification

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

Pair Corralation between GECI International and Munic SA

Assuming the 90 days trading horizon GECI International SA is expected to generate 3.33 times more return on investment than Munic SA. However, GECI International is 3.33 times more volatile than Munic SA. It trades about 0.05 of its potential returns per unit of risk. Munic SA is currently generating about -0.04 per unit of risk. If you would invest  2,100  in GECI International SA on September 29, 2024 and sell it today you would lose (1,831) from holding GECI International SA or give up 87.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

GECI International SA  vs.  Munic SA

GECI International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GECI International SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Munic SA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Munic SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Munic SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GECI International and Munic SA

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

The idea behind GECI International SA and Munic 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.