Correlation Between SWISS WATER and D R

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

Diversification Opportunities for SWISS WATER and D R

-0.2

Correlation Coefficient

SWISS WATER  D R

Good diversification

The 3 months correlation between SWISS and HO2 is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding SWISS WATER DECAFFCOFFEE and D R HORTON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on D R HORTON 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 D R. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of D R HORTON has no effect on the direction of SWISS WATER i.e., SWISS WATER and D R go up and down completely randomly.

Pair Corralation between SWISS WATER and D R

Assuming the 90 days horizon SWISS WATER DECAFFCOFFEE is expected to generate 2.0 times more return on investment than D R. However, SWISS WATER is 2.0 times more volatile than D R HORTON. It trades about -0.06 of its potential returns per unit of risk. D R HORTON is currently generating about -0.33 per unit of risk. If you would invest  262.00  in SWISS WATER DECAFFCOFFEE on October 10, 2024 and sell it today you would lose (12.00) from holding SWISS WATER DECAFFCOFFEE or give up 4.58% of portfolio value over 90 days.

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

SWISS WATER DECAFFCOFFEE  vs.  D R HORTON

SWISS WATER DECAFFCOFFEE

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days SWISS WATER DECAFFCOFFEE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SWISS WATER is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

D R HORTON

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days D R HORTON has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with SWISS WATER and D R

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

The idea behind SWISS WATER DECAFFCOFFEE and D R HORTON 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.