Correlation Between GEA GROUP and Carrefour

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

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

Diversification Opportunities for GEA GROUP and Carrefour

-0.68

Correlation Coefficient

GEA GROUP  Carrefour

Excellent diversification

The 3 months correlation between GEA and Carrefour is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding GEA GROUP and Carrefour SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carrefour SA and GEA GROUP 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 GEA GROUP are associated (or correlated) with Carrefour. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carrefour SA has no effect on the direction of GEA GROUP i.e., GEA GROUP and Carrefour go up and down completely randomly.

Pair Corralation between GEA GROUP and Carrefour

Assuming the 90 days horizon GEA GROUP is expected to generate 0.62 times more return on investment than Carrefour. However, GEA GROUP is 1.62 times less risky than Carrefour. It trades about 0.21 of its potential returns per unit of risk. Carrefour SA is currently generating about -0.06 per unit of risk. If you would invest  4,220  in GEA GROUP on September 14, 2024 and sell it today you would earn a total of  658.00  from holding GEA GROUP or generate 15.59% return on investment over 90 days.

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

GEA GROUP  vs.  Carrefour SA

GEA GROUP

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GEA GROUP are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GEA GROUP reported solid returns over the last few months and may actually be approaching a breakup point.

Carrefour SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carrefour SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with GEA GROUP and Carrefour

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

The idea behind GEA GROUP and Carrefour 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.