Correlation Between Geberit AG and Vinci SA

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

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

Diversification Opportunities for Geberit AG and Vinci SA

0.81

Correlation Coefficient

Geberit AG  Vinci SA

Very poor diversification

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

Pair Corralation between Geberit AG and Vinci SA

Assuming the 90 days horizon Geberit AG is expected to generate 1.76 times less return on investment than Vinci SA. In addition to that, Geberit AG is 1.1 times more volatile than Vinci SA ADR. It trades about 0.15 of its total potential returns per unit of risk. Vinci SA ADR is currently generating about 0.29 per unit of volatility. If you would invest  2,544  in Vinci SA ADR on December 20, 2024 and sell it today you would earn a total of  715.00  from holding Vinci SA ADR or generate 28.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

Geberit AG ADR  vs.  Vinci SA ADR

Geberit AG ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Geberit AG ADR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Geberit AG showed solid returns over the last few months and may actually be approaching a breakup point.

Vinci SA ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vinci SA ADR are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Vinci SA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Geberit AG and Vinci SA

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

The idea behind Geberit AG ADR and Vinci SA ADR 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.