Correlation Between SWISS WATER and ULTRA CLEAN
Can any of the company-specific risk be diversified away by investing in both SWISS WATER and ULTRA CLEAN 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 ULTRA CLEAN 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 ULTRA CLEAN HLDGS, you can compare the effects of market volatilities on SWISS WATER and ULTRA CLEAN 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 ULTRA CLEAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of SWISS WATER and ULTRA CLEAN.
Diversification Opportunities for SWISS WATER and ULTRA CLEAN
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SWISS and ULTRA is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding SWISS WATER DECAFFCOFFEE and ULTRA CLEAN HLDGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ULTRA CLEAN HLDGS 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 ULTRA CLEAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ULTRA CLEAN HLDGS has no effect on the direction of SWISS WATER i.e., SWISS WATER and ULTRA CLEAN go up and down completely randomly.
Pair Corralation between SWISS WATER and ULTRA CLEAN
Assuming the 90 days horizon SWISS WATER is expected to generate 1.45 times less return on investment than ULTRA CLEAN. But when comparing it to its historical volatility, SWISS WATER DECAFFCOFFEE is 1.03 times less risky than ULTRA CLEAN. It trades about 0.19 of its potential returns per unit of risk. ULTRA CLEAN HLDGS is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 3,160 in ULTRA CLEAN HLDGS on September 3, 2024 and sell it today you would earn a total of 460.00 from holding ULTRA CLEAN HLDGS or generate 14.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SWISS WATER DECAFFCOFFEE vs. ULTRA CLEAN HLDGS
Performance |
| Timeline |
| SWISS WATER DECAFFCOFFEE |
| ULTRA CLEAN HLDGS |
SWISS WATER and ULTRA CLEAN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SWISS WATER and ULTRA CLEAN
The main advantage of trading using opposite SWISS WATER and ULTRA CLEAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SWISS WATER position performs unexpectedly, ULTRA CLEAN 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 ULTRA CLEAN will offset losses from the drop in ULTRA CLEAN's long position.| SWISS WATER vs. Nestl SA | SWISS WATER vs. Kraft Heinz Co | SWISS WATER vs. General Mills | SWISS WATER vs. Kellogg Company |
| ULTRA CLEAN vs. TOTAL GABON | ULTRA CLEAN vs. Walgreens Boots Alliance | ULTRA CLEAN vs. Peak Resources Limited |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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