Correlation Between SWISS WATER and Equinix

Can any of the company-specific risk be diversified away by investing in both SWISS WATER and Equinix 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 Equinix 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 Equinix, you can compare the effects of market volatilities on SWISS WATER and Equinix 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 Equinix. Check out your portfolio center. Please also check ongoing floating volatility patterns of SWISS WATER and Equinix.

Diversification Opportunities for SWISS WATER and Equinix

0.05

Correlation Coefficient

SWISS WATER  Equinix

Significant diversification

The 3 months correlation between SWISS and Equinix is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding SWISS WATER DECAFFCOFFEE and Equinix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinix 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 Equinix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinix has no effect on the direction of SWISS WATER i.e., SWISS WATER and Equinix go up and down completely randomly.

Pair Corralation between SWISS WATER and Equinix

Assuming the 90 days horizon SWISS WATER is expected to generate 2.64 times less return on investment than Equinix. In addition to that, SWISS WATER is 1.76 times more volatile than Equinix. It trades about 0.04 of its total potential returns per unit of risk. Equinix is currently generating about 0.18 per unit of volatility. If you would invest  78,586  in Equinix on October 9, 2024 and sell it today you would earn a total of  13,854  from holding Equinix or generate 17.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

SWISS WATER DECAFFCOFFEE  vs.  Equinix

SWISS WATER DECAFFCOFFEE

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SWISS WATER DECAFFCOFFEE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SWISS WATER may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Equinix

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Equinix are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Equinix reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SWISS WATER and Equinix

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

The idea behind SWISS WATER DECAFFCOFFEE and Equinix 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.