Correlation Between Gestamp Automocion and CIE Automotive

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

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

Diversification Opportunities for Gestamp Automocion and CIE Automotive

-0.63

Correlation Coefficient

Gestamp Automocion  CIE Automotive

Excellent diversification

The 3 months correlation between Gestamp and CIE is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Gestamp Automocion SA and CIE Automotive SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIE Automotive SA and Gestamp Automocion 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 Gestamp Automocion SA are associated (or correlated) with CIE Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIE Automotive SA has no effect on the direction of Gestamp Automocion i.e., Gestamp Automocion and CIE Automotive go up and down completely randomly.

Pair Corralation between Gestamp Automocion and CIE Automotive

Assuming the 90 days trading horizon Gestamp Automocion SA is expected to generate 1.54 times more return on investment than CIE Automotive. However, Gestamp Automocion is 1.54 times more volatile than CIE Automotive SA. It trades about 0.09 of its potential returns per unit of risk. CIE Automotive SA is currently generating about -0.1 per unit of risk. If you would invest  237.00  in Gestamp Automocion SA on December 29, 2024 and sell it today you would earn a total of  27.00  from holding Gestamp Automocion SA or generate 11.39% return on investment over 90 days.

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

Gestamp Automocion SA  vs.  CIE Automotive SA

Gestamp Automocion

Risk-Adjusted Performance

Modest

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

CIE Automotive SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days CIE Automotive SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Gestamp Automocion and CIE Automotive

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

The idea behind Gestamp Automocion SA and CIE Automotive 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.