Correlation Between SWISS WATER and THORNEY TECHS

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

Diversification Opportunities for SWISS WATER and THORNEY TECHS

0.43

Correlation Coefficient

SWISS WATER  THORNEY TECHS

Very weak diversification

The 3 months correlation between SWISS and THORNEY is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding SWISS WATER DECAFFCOFFEE and THORNEY TECHS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THORNEY TECHS 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 THORNEY TECHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THORNEY TECHS LTD has no effect on the direction of SWISS WATER i.e., SWISS WATER and THORNEY TECHS go up and down completely randomly.

Pair Corralation between SWISS WATER and THORNEY TECHS

Assuming the 90 days horizon SWISS WATER DECAFFCOFFEE is expected to generate 0.48 times more return on investment than THORNEY TECHS. However, SWISS WATER DECAFFCOFFEE is 2.07 times less risky than THORNEY TECHS. It trades about 0.04 of its potential returns per unit of risk. THORNEY TECHS LTD is currently generating about -0.01 per unit of risk. If you would invest  189.00  in SWISS WATER DECAFFCOFFEE on September 27, 2024 and sell it today you would earn a total of  63.00  from holding SWISS WATER DECAFFCOFFEE or generate 33.33% return on investment over 90 days.

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

SWISS WATER DECAFFCOFFEE  vs.  THORNEY TECHS LTD

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 fragile basic indicators, SWISS WATER may actually be approaching a critical reversion point that can send shares even higher in January 2025.

THORNEY TECHS LTD

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SWISS WATER and THORNEY TECHS

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

The idea behind SWISS WATER DECAFFCOFFEE and THORNEY TECHS 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.