Correlation Between Cboe UK and St Galler

Can any of the company-specific risk be diversified away by investing in both Cboe UK and St Galler 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 Cboe UK and St Galler into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cboe UK Consumer and St Galler Kantonalbank, you can compare the effects of market volatilities on Cboe UK and St Galler 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 Cboe UK with a short position of St Galler. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cboe UK and St Galler.

Diversification Opportunities for Cboe UK and St Galler

0.41

Correlation Coefficient

Cboe UK  St Galler

Very weak diversification

The 3 months correlation between Cboe and 0QQZ is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Cboe UK Consumer and St Galler Kantonalbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on St Galler Kantonalbank and Cboe UK 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 Cboe UK Consumer are associated (or correlated) with St Galler. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of St Galler Kantonalbank has no effect on the direction of Cboe UK i.e., Cboe UK and St Galler go up and down completely randomly.

Pair Corralation between Cboe UK and St Galler

Assuming the 90 days trading horizon Cboe UK Consumer is expected to generate 1.34 times more return on investment than St Galler. However, Cboe UK is 1.34 times more volatile than St Galler Kantonalbank. It trades about 0.28 of its potential returns per unit of risk. St Galler Kantonalbank is currently generating about 0.03 per unit of risk. If you would invest  2,770,118  in Cboe UK Consumer on August 31, 2024 and sell it today you would earn a total of  485,346  from holding Cboe UK Consumer or generate 17.52% return on investment over 90 days.

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

Cboe UK Consumer  vs.  St Galler Kantonalbank

Pair Trading with Cboe UK and St Galler

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

The idea behind Cboe UK Consumer and St Galler Kantonalbank 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 Commodity Directory module to find actively traded commodities issued by global exchanges.