Correlation Between Big 5 and SWISS WATER
Can any of the company-specific risk be diversified away by investing in both Big 5 and SWISS WATER 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 Big 5 and SWISS WATER into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big 5 Sporting and SWISS WATER DECAFFCOFFEE, you can compare the effects of market volatilities on Big 5 and SWISS WATER 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 Big 5 with a short position of SWISS WATER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and SWISS WATER.
Diversification Opportunities for Big 5 and SWISS WATER
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Big and SWISS is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and SWISS WATER DECAFFCOFFEE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SWISS WATER DECAFFCOFFEE and Big 5 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 Big 5 Sporting are associated (or correlated) with SWISS WATER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SWISS WATER DECAFFCOFFEE has no effect on the direction of Big 5 i.e., Big 5 and SWISS WATER go up and down completely randomly.
Pair Corralation between Big 5 and SWISS WATER
Assuming the 90 days horizon Big 5 Sporting is expected to under-perform the SWISS WATER. In addition to that, Big 5 is 1.49 times more volatile than SWISS WATER DECAFFCOFFEE. It trades about -0.07 of its total potential returns per unit of risk. SWISS WATER DECAFFCOFFEE is currently generating about 0.04 per unit of volatility. If you would invest 183.00 in SWISS WATER DECAFFCOFFEE on August 24, 2024 and sell it today you would earn a total of 85.00 from holding SWISS WATER DECAFFCOFFEE or generate 46.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Big 5 Sporting vs. SWISS WATER DECAFFCOFFEE
Performance |
| Timeline |
| Big 5 Sporting |
| SWISS WATER DECAFFCOFFEE |
Big 5 and SWISS WATER Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big 5 and SWISS WATER
The main advantage of trading using opposite Big 5 and SWISS WATER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 position performs unexpectedly, SWISS WATER 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 SWISS WATER will offset losses from the drop in SWISS WATER's long position.The idea behind Big 5 Sporting and SWISS WATER DECAFFCOFFEE 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.| SWISS WATER vs. Superior Plus Corp | SWISS WATER vs. NMI Holdings | SWISS WATER vs. Origin Agritech | SWISS WATER vs. SIVERS SEMICONDUCTORS AB |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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