Correlation Between SwissCom and PCCW
Can any of the company-specific risk be diversified away by investing in both SwissCom and PCCW 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 PCCW into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SwissCom AG and PCCW Limited, you can compare the effects of market volatilities on SwissCom and PCCW 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 PCCW. Check out your portfolio center. Please also check ongoing floating volatility patterns of SwissCom and PCCW.
Diversification Opportunities for SwissCom and PCCW
Weak diversification
The 3 months correlation between SwissCom and PCCW is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding SwissCom AG and PCCW Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCCW Limited 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 PCCW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCCW Limited has no effect on the direction of SwissCom i.e., SwissCom and PCCW go up and down completely randomly.
Pair Corralation between SwissCom and PCCW
Assuming the 90 days horizon SwissCom AG is expected to under-perform the PCCW. But the pink sheet apears to be less risky and, when comparing its historical volatility, SwissCom AG is 2.77 times less risky than PCCW. The pink sheet trades about -0.41 of its potential returns per unit of risk. The PCCW Limited is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 51.00 in PCCW Limited on August 29, 2024 and sell it today you would lose (1.00) from holding PCCW Limited or give up 1.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SwissCom AG vs. PCCW Limited
Performance |
| Timeline |
| SwissCom AG |
| PCCW Limited |
SwissCom and PCCW Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SwissCom and PCCW
The main advantage of trading using opposite SwissCom and PCCW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SwissCom position performs unexpectedly, PCCW 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 PCCW will offset losses from the drop in PCCW's long position.| SwissCom vs. HUMANA INC | SwissCom vs. SCOR PK | SwissCom vs. Aquagold International | SwissCom vs. Barloworld Ltd ADR |
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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