Correlation Between Swatch Group and Christian Dior
Can any of the company-specific risk be diversified away by investing in both Swatch Group and Christian Dior 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 Swatch Group and Christian Dior into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Swatch Group AG and Christian Dior SE, you can compare the effects of market volatilities on Swatch Group and Christian Dior 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 Swatch Group with a short position of Christian Dior. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swatch Group and Christian Dior.
Diversification Opportunities for Swatch Group and Christian Dior
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Swatch and Christian is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Swatch Group AG and Christian Dior SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Christian Dior SE and Swatch Group 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 Swatch Group AG are associated (or correlated) with Christian Dior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Christian Dior SE has no effect on the direction of Swatch Group i.e., Swatch Group and Christian Dior go up and down completely randomly.
Pair Corralation between Swatch Group and Christian Dior
Assuming the 90 days horizon Swatch Group AG is expected to generate 0.71 times more return on investment than Christian Dior. However, Swatch Group AG is 1.41 times less risky than Christian Dior. It trades about -0.05 of its potential returns per unit of risk. Christian Dior SE is currently generating about -0.06 per unit of risk. If you would invest 1,148 in Swatch Group AG on August 28, 2024 and sell it today you would lose (261.00) from holding Swatch Group AG or give up 22.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 82.21% |
| Values | Daily Returns |
Swatch Group AG vs. Christian Dior SE
Performance |
| Timeline |
| Swatch Group AG |
| Christian Dior SE |
Swatch Group and Christian Dior Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Swatch Group and Christian Dior
The main advantage of trading using opposite Swatch Group and Christian Dior positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swatch Group position performs unexpectedly, Christian Dior 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 Christian Dior will offset losses from the drop in Christian Dior's long position.The idea behind Swatch Group AG and Christian Dior SE 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.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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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