Correlation Between GECI International and Solutions

Can any of the company-specific risk be diversified away by investing in both GECI International and Solutions 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 Solutions 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 Solutions 30 SE, you can compare the effects of market volatilities on GECI International and Solutions 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 Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of GECI International and Solutions.

Diversification Opportunities for GECI International and Solutions

0.92

Correlation Coefficient

GECI International  Solutions

Almost no diversification

The 3 months correlation between GECI and Solutions is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding GECI International SA and Solutions 30 SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solutions 30 SE 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 Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solutions 30 SE has no effect on the direction of GECI International i.e., GECI International and Solutions go up and down completely randomly.

Pair Corralation between GECI International and Solutions

Assuming the 90 days trading horizon GECI International is expected to generate 1.89 times less return on investment than Solutions. In addition to that, GECI International is 1.09 times more volatile than Solutions 30 SE. It trades about 0.1 of its total potential returns per unit of risk. Solutions 30 SE is currently generating about 0.2 per unit of volatility. If you would invest  86.00  in Solutions 30 SE on December 30, 2024 and sell it today you would earn a total of  72.00  from holding Solutions 30 SE or generate 83.72% return on investment over 90 days.

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

GECI International SA  vs.  Solutions 30 SE

GECI International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GECI International SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, GECI International reported solid returns over the last few months and may actually be approaching a breakup point.

Solutions 30 SE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Solutions 30 SE are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Solutions sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GECI International and Solutions

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

The idea behind GECI International SA and Solutions 30 SE 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.