Correlation Between Swatch Group and Chow Tai
Can any of the company-specific risk be diversified away by investing in both Swatch Group and Chow Tai 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 Chow Tai 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 Chow Tai Fook, you can compare the effects of market volatilities on Swatch Group and Chow Tai 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 Chow Tai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swatch Group and Chow Tai.
Diversification Opportunities for Swatch Group and Chow Tai
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Swatch and Chow is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Swatch Group AG and Chow Tai Fook in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chow Tai Fook 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 Chow Tai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chow Tai Fook has no effect on the direction of Swatch Group i.e., Swatch Group and Chow Tai go up and down completely randomly.
Pair Corralation between Swatch Group and Chow Tai
Assuming the 90 days horizon Swatch Group is expected to generate 2.77 times less return on investment than Chow Tai. But when comparing it to its historical volatility, Swatch Group AG is 1.02 times less risky than Chow Tai. It trades about 0.06 of its potential returns per unit of risk. Chow Tai Fook is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 881.00 in Chow Tai Fook on November 3, 2024 and sell it today you would earn a total of 53.00 from holding Chow Tai Fook or generate 6.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Swatch Group AG vs. Chow Tai Fook
Performance |
| Timeline |
| Swatch Group AG |
| Chow Tai Fook |
Swatch Group and Chow Tai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Swatch Group and Chow Tai
The main advantage of trading using opposite Swatch Group and Chow Tai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swatch Group position performs unexpectedly, Chow Tai 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 Chow Tai will offset losses from the drop in Chow Tai's long position.| Swatch Group vs. Kering SA | Swatch Group vs. Burberry Group Plc | Swatch Group vs. Prada Spa PK | Swatch Group vs. Compagnie Financire Richemont |
| Chow Tai vs. Prada Spa PK | Chow Tai vs. Christian Dior SE | Chow Tai vs. Kering SA | Chow Tai vs. Christian Dior SE |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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