Correlation Between SWISS WATER and Northern Graphite

Can any of the company-specific risk be diversified away by investing in both SWISS WATER and Northern Graphite 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 SWISS WATER and Northern Graphite into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SWISS WATER DECAFFCOFFEE and Northern Graphite, you can compare the effects of market volatilities on SWISS WATER and Northern Graphite 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 SWISS WATER with a short position of Northern Graphite. Check out your portfolio center. Please also check ongoing floating volatility patterns of SWISS WATER and Northern Graphite.

Diversification Opportunities for SWISS WATER and Northern Graphite

0.5

Correlation Coefficient

SWISS WATER  Northern Graphite

Very weak diversification

The 3 months correlation between SWISS and Northern is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding SWISS WATER DECAFFCOFFEE and Northern Graphite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Graphite and SWISS WATER 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 SWISS WATER DECAFFCOFFEE are associated (or correlated) with Northern Graphite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Graphite has no effect on the direction of SWISS WATER i.e., SWISS WATER and Northern Graphite go up and down completely randomly.

Pair Corralation between SWISS WATER and Northern Graphite

Assuming the 90 days horizon SWISS WATER DECAFFCOFFEE is expected to generate 0.35 times more return on investment than Northern Graphite. However, SWISS WATER DECAFFCOFFEE is 2.88 times less risky than Northern Graphite. It trades about -0.08 of its potential returns per unit of risk. Northern Graphite is currently generating about -0.03 per unit of risk. If you would invest  252.00  in SWISS WATER DECAFFCOFFEE on December 22, 2024 and sell it today you would lose (40.00) from holding SWISS WATER DECAFFCOFFEE or give up 15.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

SWISS WATER DECAFFCOFFEE  vs.  Northern Graphite

SWISS WATER DECAFFCOFFEE

Risk-Adjusted Performance

Very Weak

Over the last 90 days SWISS WATER DECAFFCOFFEE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Northern Graphite

Risk-Adjusted Performance

Very Weak

Over the last 90 days Northern Graphite has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with SWISS WATER and Northern Graphite

The main advantage of trading using opposite SWISS WATER and Northern Graphite positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SWISS WATER position performs unexpectedly, Northern Graphite 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 Northern Graphite will offset losses from the drop in Northern Graphite's long position.

The idea behind SWISS WATER DECAFFCOFFEE and Northern Graphite 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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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.