Correlation Between Schweizerische Nationalbank and Metall Zug
Can any of the company-specific risk be diversified away by investing in both Schweizerische Nationalbank and Metall Zug 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 Schweizerische Nationalbank and Metall Zug into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Schweizerische Nationalbank and Metall Zug AG, you can compare the effects of market volatilities on Schweizerische Nationalbank and Metall Zug 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 Schweizerische Nationalbank with a short position of Metall Zug. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schweizerische Nationalbank and Metall Zug.
Diversification Opportunities for Schweizerische Nationalbank and Metall Zug
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Schweizerische and Metall is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Schweizerische Nationalbank and Metall Zug AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metall Zug AG and Schweizerische Nationalbank 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 Schweizerische Nationalbank are associated (or correlated) with Metall Zug. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metall Zug AG has no effect on the direction of Schweizerische Nationalbank i.e., Schweizerische Nationalbank and Metall Zug go up and down completely randomly.
Pair Corralation between Schweizerische Nationalbank and Metall Zug
Assuming the 90 days trading horizon Schweizerische Nationalbank is expected to generate 0.91 times more return on investment than Metall Zug. However, Schweizerische Nationalbank is 1.1 times less risky than Metall Zug. It trades about 0.47 of its potential returns per unit of risk. Metall Zug AG is currently generating about -0.42 per unit of risk. If you would invest 319,000 in Schweizerische Nationalbank on October 26, 2024 and sell it today you would earn a total of 49,000 from holding Schweizerische Nationalbank or generate 15.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Schweizerische Nationalbank vs. Metall Zug AG
Performance |
| Timeline |
| Schweizerische Nationalbank |
| Metall Zug AG |
Schweizerische Nationalbank and Metall Zug Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Schweizerische Nationalbank and Metall Zug
The main advantage of trading using opposite Schweizerische Nationalbank and Metall Zug positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Schweizerische Nationalbank position performs unexpectedly, Metall Zug 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 Metall Zug will offset losses from the drop in Metall Zug's long position.The idea behind Schweizerische Nationalbank and Metall Zug 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.
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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