Correlation Between Visa and Geberit AG

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

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

Diversification Opportunities for Visa and Geberit AG

-0.18

Correlation Coefficient

Visa  Geberit AG

Good diversification

The 3 months correlation between Visa and Geberit is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Geberit AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geberit AG and Visa 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 Visa Class A 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 has no effect on the direction of Visa i.e., Visa and Geberit AG go up and down completely randomly.

Pair Corralation between Visa and Geberit AG

Taking into account the 90-day investment horizon Visa is expected to generate 2.19 times less return on investment than Geberit AG. But when comparing it to its historical volatility, Visa Class A is 2.37 times less risky than Geberit AG. It trades about 0.11 of its potential returns per unit of risk. Geberit AG is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5,550  in Geberit AG on September 16, 2024 and sell it today you would earn a total of  200.00  from holding Geberit AG or generate 3.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Visa Class A  vs.  Geberit AG

Visa Class A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Geberit AG

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Geberit AG are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Geberit AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Visa and Geberit AG

The main advantage of trading using opposite Visa and Geberit AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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 Visa Class A and Geberit AG 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.