Correlation Between IDI SCA and GEA Grenobl

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

By analyzing existing cross correlation between IDI SCA and GEA Grenobl Elect, you can compare the effects of market volatilities on IDI SCA and GEA Grenobl 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 IDI SCA with a short position of GEA Grenobl. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDI SCA and GEA Grenobl.

Diversification Opportunities for IDI SCA and GEA Grenobl

0.72

Correlation Coefficient

IDI SCA  GEA Grenobl

Poor diversification

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

Pair Corralation between IDI SCA and GEA Grenobl

Assuming the 90 days trading horizon IDI SCA is expected to generate 2.03 times less return on investment than GEA Grenobl. But when comparing it to its historical volatility, IDI SCA is 2.43 times less risky than GEA Grenobl. It trades about 0.16 of its potential returns per unit of risk. GEA Grenobl Elect is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  7,450  in GEA Grenobl Elect on December 28, 2024 and sell it today you would earn a total of  1,300  from holding GEA Grenobl Elect or generate 17.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

IDI SCA  vs.  GEA Grenobl Elect

IDI SCA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IDI SCA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IDI SCA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

GEA Grenobl Elect

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GEA Grenobl Elect are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GEA Grenobl sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IDI SCA and GEA Grenobl

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

The idea behind IDI SCA and GEA Grenobl Elect 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.