Correlation Between Geberit AG and Sika AG

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

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

Diversification Opportunities for Geberit AG and Sika AG

0.33

Correlation Coefficient

Geberit AG  Sika AG

Weak diversification

The 3 months correlation between Geberit and Sika is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Geberit AG and Sika AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sika AG 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 Sika AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sika AG has no effect on the direction of Geberit AG i.e., Geberit AG and Sika AG go up and down completely randomly.

Pair Corralation between Geberit AG and Sika AG

Assuming the 90 days trading horizon Geberit AG is expected to generate 1.05 times more return on investment than Sika AG. However, Geberit AG is 1.05 times more volatile than Sika AG. It trades about 0.08 of its potential returns per unit of risk. Sika AG is currently generating about 0.03 per unit of risk. If you would invest  51,460  in Geberit AG on December 30, 2024 and sell it today you would earn a total of  4,360  from holding Geberit AG or generate 8.47% 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.  Sika AG

Geberit AG

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Geberit AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Geberit AG may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Sika AG

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sika AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Sika AG is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Geberit AG and Sika AG

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

The idea behind Geberit AG and Sika AG 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.