Correlation Between Gecina SA and Preferred Bank

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

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

Diversification Opportunities for Gecina SA and Preferred Bank

-0.75

Correlation Coefficient

Gecina SA  Preferred Bank

Pay attention - limited upside

The 3 months correlation between Gecina and Preferred is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Gecina SA and Preferred Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preferred Bank and Gecina SA 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 Gecina SA are associated (or correlated) with Preferred Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preferred Bank has no effect on the direction of Gecina SA i.e., Gecina SA and Preferred Bank go up and down completely randomly.

Pair Corralation between Gecina SA and Preferred Bank

Assuming the 90 days trading horizon Gecina SA is expected to under-perform the Preferred Bank. But the stock apears to be less risky and, when comparing its historical volatility, Gecina SA is 2.28 times less risky than Preferred Bank. The stock trades about -0.18 of its potential returns per unit of risk. The Preferred Bank is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  7,250  in Preferred Bank on October 8, 2024 and sell it today you would earn a total of  1,050  from holding Preferred Bank or generate 14.48% return on investment over 90 days.

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

Gecina SA  vs.  Preferred Bank

Gecina SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gecina SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Preferred Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Preferred Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Preferred Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gecina SA and Preferred Bank

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

The idea behind Gecina SA and Preferred Bank 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.