Correlation Between ITALIAN WINE and GEA GROUP

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

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

Diversification Opportunities for ITALIAN WINE and GEA GROUP

0.09

Correlation Coefficient

ITALIAN WINE  GEA GROUP

Significant diversification

The 3 months correlation between ITALIAN and GEA is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding ITALIAN WINE BRANDS and GEA GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEA GROUP and ITALIAN WINE 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 ITALIAN WINE BRANDS are associated (or correlated) with GEA GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEA GROUP has no effect on the direction of ITALIAN WINE i.e., ITALIAN WINE and GEA GROUP go up and down completely randomly.

Pair Corralation between ITALIAN WINE and GEA GROUP

Assuming the 90 days horizon ITALIAN WINE is expected to generate 1.24 times less return on investment than GEA GROUP. In addition to that, ITALIAN WINE is 2.28 times more volatile than GEA GROUP. It trades about 0.13 of its total potential returns per unit of risk. GEA GROUP is currently generating about 0.37 per unit of volatility. If you would invest  5,040  in GEA GROUP on December 4, 2024 and sell it today you would earn a total of  485.00  from holding GEA GROUP or generate 9.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

ITALIAN WINE BRANDS  vs.  GEA GROUP

ITALIAN WINE BRANDS

Risk-Adjusted Performance

Modest

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

GEA GROUP

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GEA GROUP are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GEA GROUP reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ITALIAN WINE and GEA GROUP

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

The idea behind ITALIAN WINE BRANDS and GEA GROUP 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.