Correlation Between GEA GROUP and Safran SA
Can any of the company-specific risk be diversified away by investing in both GEA GROUP and Safran 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 GEA GROUP and Safran SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GEA GROUP and Safran SA, you can compare the effects of market volatilities on GEA GROUP and Safran 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 GEA GROUP with a short position of Safran SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GEA GROUP and Safran SA.
Diversification Opportunities for GEA GROUP and Safran SA
Very poor diversification
The 3 months correlation between GEA and Safran is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding GEA GROUP and Safran SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safran 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 Safran SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safran SA has no effect on the direction of GEA GROUP i.e., GEA GROUP and Safran SA go up and down completely randomly.
Pair Corralation between GEA GROUP and Safran SA
Assuming the 90 days horizon GEA GROUP is expected to generate 0.79 times more return on investment than Safran SA. However, GEA GROUP is 1.26 times less risky than Safran SA. It trades about 0.23 of its potential returns per unit of risk. Safran SA is currently generating about 0.16 per unit of risk. If you would invest 4,808 in GEA GROUP on December 28, 2024 and sell it today you would earn a total of 1,012 from holding GEA GROUP or generate 21.05% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
GEA GROUP vs. Safran SA
Performance |
Timeline |
GEA GROUP |
Safran SA |
GEA GROUP and Safran SA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GEA GROUP and Safran SA
The main advantage of trading using opposite GEA GROUP and Safran SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GEA GROUP position performs unexpectedly, Safran 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 Safran SA will offset losses from the drop in Safran SA's long position.GEA GROUP vs. NORWEGIAN AIR SHUT | GEA GROUP vs. FAIR ISAAC | GEA GROUP vs. Yanzhou Coal Mining | GEA GROUP vs. Endeavour Mining PLC |
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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