Correlation Between Geberit AG and Inwido AB

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

By analyzing existing cross correlation between Geberit AG and Inwido AB, you can compare the effects of market volatilities on Geberit AG and Inwido AB 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 Inwido AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Geberit AG and Inwido AB.

Diversification Opportunities for Geberit AG and Inwido AB

0.24

Correlation Coefficient

Geberit AG  Inwido AB

Modest diversification

The 3 months correlation between Geberit and Inwido is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Geberit AG and Inwido AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inwido AB 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 are associated (or correlated) with Inwido AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inwido AB has no effect on the direction of Geberit AG i.e., Geberit AG and Inwido AB go up and down completely randomly.

Pair Corralation between Geberit AG and Inwido AB

Assuming the 90 days trading horizon Geberit AG is expected to generate 5.66 times less return on investment than Inwido AB. But when comparing it to its historical volatility, Geberit AG is 2.81 times less risky than Inwido AB. It trades about 0.03 of its potential returns per unit of risk. Inwido AB is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  490.00  in Inwido AB on September 26, 2024 and sell it today you would earn a total of  1,081  from holding Inwido AB or generate 220.61% return on investment over 90 days.

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

Geberit AG  vs.  Inwido AB

Geberit AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Geberit AG 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.

Inwido AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inwido AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Inwido AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Geberit AG and Inwido AB

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

The idea behind Geberit AG and Inwido AB 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.