Correlation Between Swatch Group and Tapestry
Can any of the company-specific risk be diversified away by investing in both Swatch Group and Tapestry 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 Tapestry 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 Tapestry, you can compare the effects of market volatilities on Swatch Group and Tapestry 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 Tapestry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swatch Group and Tapestry.
Diversification Opportunities for Swatch Group and Tapestry
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Swatch and Tapestry is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Swatch Group AG and Tapestry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tapestry 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 Tapestry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tapestry has no effect on the direction of Swatch Group i.e., Swatch Group and Tapestry go up and down completely randomly.
Pair Corralation between Swatch Group and Tapestry
Assuming the 90 days horizon Swatch Group AG is expected to under-perform the Tapestry. But the pink sheet apears to be less risky and, when comparing its historical volatility, Swatch Group AG is 1.03 times less risky than Tapestry. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Tapestry is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 4,062 in Tapestry on August 30, 2024 and sell it today you would earn a total of 2,030 from holding Tapestry or generate 49.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Swatch Group AG vs. Tapestry
Performance |
| Timeline |
| Swatch Group AG |
| Tapestry |
Swatch Group and Tapestry Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Swatch Group and Tapestry
The main advantage of trading using opposite Swatch Group and Tapestry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swatch Group position performs unexpectedly, Tapestry 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 Tapestry will offset losses from the drop in Tapestry'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 |
| Tapestry vs. Signet Jewelers | Tapestry vs. Movado Group | Tapestry vs. Lanvin Group Holdings | Tapestry vs. TheRealReal |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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