Correlation Between Gestamp Automocion and Vidrala SA

Can any of the company-specific risk be diversified away by investing in both Gestamp Automocion and Vidrala 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 Gestamp Automocion and Vidrala SA 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 Vidrala SA, you can compare the effects of market volatilities on Gestamp Automocion and Vidrala 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 Gestamp Automocion with a short position of Vidrala SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gestamp Automocion and Vidrala SA.

Diversification Opportunities for Gestamp Automocion and Vidrala SA

0.72

Correlation Coefficient

Gestamp Automocion  Vidrala SA

Poor diversification

The 3 months correlation between Gestamp and Vidrala is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Gestamp Automocion SA and Vidrala SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vidrala 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 Vidrala SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vidrala SA has no effect on the direction of Gestamp Automocion i.e., Gestamp Automocion and Vidrala SA go up and down completely randomly.

Pair Corralation between Gestamp Automocion and Vidrala SA

Assuming the 90 days trading horizon Gestamp Automocion is expected to generate 1.02 times less return on investment than Vidrala SA. In addition to that, Gestamp Automocion is 1.69 times more volatile than Vidrala SA. It trades about 0.06 of its total potential returns per unit of risk. Vidrala SA is currently generating about 0.1 per unit of volatility. If you would invest  9,262  in Vidrala SA on December 2, 2024 and sell it today you would earn a total of  638.00  from holding Vidrala SA or generate 6.89% return on investment over 90 days.

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

Gestamp Automocion SA  vs.  Vidrala SA

Gestamp Automocion

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gestamp Automocion SA are ranked lower than 4 (%) 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.

Vidrala SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vidrala SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Vidrala SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Gestamp Automocion and Vidrala SA

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

The idea behind Gestamp Automocion SA and Vidrala 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.