Correlation Between Quanex Building and Geberit AG

Can any of the company-specific risk be diversified away by investing in both Quanex Building and Geberit AG 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 Quanex Building and Geberit AG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Quanex Building Products and Geberit AG ADR, you can compare the effects of market volatilities on Quanex Building and Geberit AG 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 Quanex Building with a short position of Geberit AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quanex Building and Geberit AG.

Diversification Opportunities for Quanex Building and Geberit AG

-0.37

Correlation Coefficient

Quanex Building  Geberit AG

Very good diversification

The 3 months correlation between Quanex and Geberit is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Quanex Building Products and Geberit AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geberit AG ADR and Quanex Building 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 Quanex Building Products are associated (or correlated) with Geberit AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geberit AG ADR has no effect on the direction of Quanex Building i.e., Quanex Building and Geberit AG go up and down completely randomly.

Pair Corralation between Quanex Building and Geberit AG

Allowing for the 90-day total investment horizon Quanex Building Products is expected to under-perform the Geberit AG. In addition to that, Quanex Building is 2.78 times more volatile than Geberit AG ADR. It trades about -0.2 of its total potential returns per unit of risk. Geberit AG ADR is currently generating about -0.07 per unit of volatility. If you would invest  5,861  in Geberit AG ADR on September 21, 2024 and sell it today you would lose (128.00) from holding Geberit AG ADR or give up 2.18% of portfolio value over 90 days.

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

Quanex Building Products  vs.  Geberit AG ADR

Quanex Building Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quanex Building Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Geberit AG ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Geberit AG ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Quanex Building and Geberit AG

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

The idea behind Quanex Building Products and Geberit AG ADR 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.