Correlation Between North American and SWISS WATER
Can any of the company-specific risk be diversified away by investing in both North American 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 North American and SWISS WATER into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and SWISS WATER DECAFFCOFFEE, you can compare the effects of market volatilities on North American 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 North American with a short position of SWISS WATER. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and SWISS WATER.
Diversification Opportunities for North American and SWISS WATER
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between North and SWISS is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction 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 North American 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 North American Construction 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 North American i.e., North American and SWISS WATER go up and down completely randomly.
Pair Corralation between North American and SWISS WATER
Assuming the 90 days horizon North American is expected to generate 3.4 times less return on investment than SWISS WATER. In addition to that, North American is 1.12 times more volatile than SWISS WATER DECAFFCOFFEE. It trades about 0.03 of its total potential returns per unit of risk. SWISS WATER DECAFFCOFFEE is currently generating about 0.11 per unit of volatility. If you would invest 232.00 in SWISS WATER DECAFFCOFFEE on September 2, 2024 and sell it today you would earn a total of 40.00 from holding SWISS WATER DECAFFCOFFEE or generate 17.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Construction vs. SWISS WATER DECAFFCOFFEE
Performance |
| Timeline |
| North American Const |
| SWISS WATER DECAFFCOFFEE |
North American and SWISS WATER Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and SWISS WATER
The main advantage of trading using opposite North American and SWISS WATER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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.| North American vs. Superior Plus Corp | North American vs. NMI Holdings | North American vs. Origin Agritech | North American vs. SIVERS SEMICONDUCTORS AB |
| SWISS WATER vs. Molson Coors Beverage | SWISS WATER vs. Suntory Beverage Food | SWISS WATER vs. COSMOSTEEL HLDGS | SWISS WATER vs. Khiron Life Sciences |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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