Correlation Between SWISS WATER and Benchmark Electronics
Can any of the company-specific risk be diversified away by investing in both SWISS WATER and Benchmark Electronics 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 SWISS WATER and Benchmark Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SWISS WATER DECAFFCOFFEE and Benchmark Electronics, you can compare the effects of market volatilities on SWISS WATER and Benchmark Electronics 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 SWISS WATER with a short position of Benchmark Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of SWISS WATER and Benchmark Electronics.
Diversification Opportunities for SWISS WATER and Benchmark Electronics
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SWISS and Benchmark is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding SWISS WATER DECAFFCOFFEE and Benchmark Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benchmark Electronics and SWISS WATER 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 SWISS WATER DECAFFCOFFEE are associated (or correlated) with Benchmark Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benchmark Electronics has no effect on the direction of SWISS WATER i.e., SWISS WATER and Benchmark Electronics go up and down completely randomly.
Pair Corralation between SWISS WATER and Benchmark Electronics
Assuming the 90 days horizon SWISS WATER DECAFFCOFFEE is expected to generate 1.05 times more return on investment than Benchmark Electronics. However, SWISS WATER is 1.05 times more volatile than Benchmark Electronics. It trades about -0.09 of its potential returns per unit of risk. Benchmark Electronics is currently generating about -0.27 per unit of risk. If you would invest 238.00 in SWISS WATER DECAFFCOFFEE on December 11, 2024 and sell it today you would lose (22.00) from holding SWISS WATER DECAFFCOFFEE or give up 9.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SWISS WATER DECAFFCOFFEE vs. Benchmark Electronics
Performance |
| Timeline |
| SWISS WATER DECAFFCOFFEE |
| Benchmark Electronics |
SWISS WATER and Benchmark Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SWISS WATER and Benchmark Electronics
The main advantage of trading using opposite SWISS WATER and Benchmark Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SWISS WATER position performs unexpectedly, Benchmark Electronics 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 Benchmark Electronics will offset losses from the drop in Benchmark Electronics' long position.| SWISS WATER vs. Nestl SA | SWISS WATER vs. Kraft Heinz Co | SWISS WATER vs. General Mills | SWISS WATER vs. General Mills |
| Benchmark Electronics vs. Zijin Mining Group | Benchmark Electronics vs. Endeavour Mining PLC | Benchmark Electronics vs. SERI INDUSTRIAL EO | Benchmark Electronics vs. Fortescue Metals Group |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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