Correlation Between Swisscom and SGS SA
Can any of the company-specific risk be diversified away by investing in both Swisscom and SGS SA 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 Swisscom and SGS SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Swisscom AG and SGS SA, you can compare the effects of market volatilities on Swisscom and SGS SA 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 Swisscom with a short position of SGS SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swisscom and SGS SA.
Diversification Opportunities for Swisscom and SGS SA
Very poor diversification
The 3 months correlation between Swisscom and SGS is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Swisscom AG and SGS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGS SA and Swisscom 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 Swisscom AG are associated (or correlated) with SGS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGS SA has no effect on the direction of Swisscom i.e., Swisscom and SGS SA go up and down completely randomly.
Pair Corralation between Swisscom and SGS SA
Assuming the 90 days trading horizon Swisscom AG is expected to under-perform the SGS SA. But the stock apears to be less risky and, when comparing its historical volatility, Swisscom AG is 1.03 times less risky than SGS SA. The stock trades about -0.38 of its potential returns per unit of risk. The SGS SA is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest 9,274 in SGS SA on August 29, 2024 and sell it today you would lose (586.00) from holding SGS SA or give up 6.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Swisscom AG vs. SGS SA
Performance |
| Timeline |
| Swisscom AG |
| SGS SA |
Swisscom and SGS SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Swisscom and SGS SA
The main advantage of trading using opposite Swisscom and SGS SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swisscom position performs unexpectedly, SGS SA 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 SGS SA will offset losses from the drop in SGS SA's long position.| Swisscom vs. Swiss Life Holding | Swisscom vs. Zurich Insurance Group | Swisscom vs. Swiss Re AG | Swisscom vs. ABB |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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