Correlation Between SWISS WATER and MULTI-CHEM

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

Diversification Opportunities for SWISS WATER and MULTI-CHEM

-0.05

Correlation Coefficient

SWISS WATER  MULTI-CHEM

Good diversification

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

Pair Corralation between SWISS WATER and MULTI-CHEM

Assuming the 90 days horizon SWISS WATER DECAFFCOFFEE is expected to under-perform the MULTI-CHEM. In addition to that, SWISS WATER is 1.1 times more volatile than MULTI CHEM LTD. It trades about -0.27 of its total potential returns per unit of risk. MULTI CHEM LTD is currently generating about 0.22 per unit of volatility. If you would invest  185.00  in MULTI CHEM LTD on October 15, 2024 and sell it today you would earn a total of  21.00  from holding MULTI CHEM LTD or generate 11.35% return on investment over 90 days.

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

SWISS WATER DECAFFCOFFEE  vs.  MULTI CHEM LTD

SWISS WATER DECAFFCOFFEE

Risk-Adjusted Performance

0 of 100

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

MULTI CHEM LTD

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MULTI CHEM LTD are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MULTI-CHEM reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SWISS WATER and MULTI-CHEM

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

The idea behind SWISS WATER DECAFFCOFFEE and MULTI CHEM LTD 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.