Correlation Between SGS SA and Swisscom
Can any of the company-specific risk be diversified away by investing in both SGS SA and Swisscom 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 SGS SA and Swisscom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SGS SA and Swisscom AG, you can compare the effects of market volatilities on SGS SA and Swisscom 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 SGS SA with a short position of Swisscom. Check out your portfolio center. Please also check ongoing floating volatility patterns of SGS SA and Swisscom.
Diversification Opportunities for SGS SA and Swisscom
Very poor diversification
The 3 months correlation between SGS and Swisscom is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding SGS SA and Swisscom AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swisscom AG and SGS SA 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 SGS SA are associated (or correlated) with Swisscom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swisscom AG has no effect on the direction of SGS SA i.e., SGS SA and Swisscom go up and down completely randomly.
Pair Corralation between SGS SA and Swisscom
Assuming the 90 days trading horizon SGS SA is expected to generate 1.58 times more return on investment than Swisscom. However, SGS SA is 1.58 times more volatile than Swisscom AG. It trades about 0.03 of its potential returns per unit of risk. Swisscom AG is currently generating about -0.04 per unit of risk. If you would invest 7,840 in SGS SA on August 29, 2024 and sell it today you would earn a total of 848.00 from holding SGS SA or generate 10.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SGS SA vs. Swisscom AG
Performance |
| Timeline |
| SGS SA |
| Swisscom AG |
SGS SA and Swisscom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SGS SA and Swisscom
The main advantage of trading using opposite SGS SA and Swisscom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SGS SA position performs unexpectedly, Swisscom 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 Swisscom will offset losses from the drop in Swisscom's long position.The idea behind SGS SA and Swisscom AG 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.| 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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