Correlation Between SWISS WATER and GMO Internet
Can any of the company-specific risk be diversified away by investing in both SWISS WATER and GMO Internet 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 GMO Internet 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 GMO Internet, you can compare the effects of market volatilities on SWISS WATER and GMO Internet 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 GMO Internet. Check out your portfolio center. Please also check ongoing floating volatility patterns of SWISS WATER and GMO Internet.
Diversification Opportunities for SWISS WATER and GMO Internet
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between SWISS and GMO is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding SWISS WATER DECAFFCOFFEE and GMO Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMO Internet 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 GMO Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMO Internet has no effect on the direction of SWISS WATER i.e., SWISS WATER and GMO Internet go up and down completely randomly.
Pair Corralation between SWISS WATER and GMO Internet
Assuming the 90 days horizon SWISS WATER DECAFFCOFFEE is expected to under-perform the GMO Internet. In addition to that, SWISS WATER is 2.85 times more volatile than GMO Internet. It trades about -0.15 of its total potential returns per unit of risk. GMO Internet is currently generating about 0.03 per unit of volatility. If you would invest 1,610 in GMO Internet on October 28, 2024 and sell it today you would earn a total of 10.00 from holding GMO Internet or generate 0.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SWISS WATER DECAFFCOFFEE vs. GMO Internet
Performance |
| Timeline |
| SWISS WATER DECAFFCOFFEE |
| GMO Internet |
SWISS WATER and GMO Internet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SWISS WATER and GMO Internet
The main advantage of trading using opposite SWISS WATER and GMO Internet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SWISS WATER position performs unexpectedly, GMO Internet 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 GMO Internet will offset losses from the drop in GMO Internet's long position.| SWISS WATER vs. General Mills | SWISS WATER vs. Danone SA | SWISS WATER vs. Hormel Foods | SWISS WATER vs. Kellogg Company |
| GMO Internet vs. Fevertree Drinks PLC | GMO Internet vs. ANGLO ASIAN MINING | GMO Internet vs. De Grey Mining | GMO Internet vs. MOLSON RS BEVERAGE |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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