Correlation Between CAP SA and Schwager

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

By analyzing existing cross correlation between CAP SA and Schwager, you can compare the effects of market volatilities on CAP SA and Schwager 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 CAP SA with a short position of Schwager. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAP SA and Schwager.

Diversification Opportunities for CAP SA and Schwager

-0.44

Correlation Coefficient

CAP SA  Schwager

Very good diversification

The 3 months correlation between CAP and Schwager is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding CAP SA and Schwager in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwager and CAP SA 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 CAP SA are associated (or correlated) with Schwager. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwager has no effect on the direction of CAP SA i.e., CAP SA and Schwager go up and down completely randomly.

Pair Corralation between CAP SA and Schwager

Assuming the 90 days trading horizon CAP SA is expected to generate 2.2 times more return on investment than Schwager. However, CAP SA is 2.2 times more volatile than Schwager. It trades about -0.01 of its potential returns per unit of risk. Schwager is currently generating about -0.03 per unit of risk. If you would invest  547,590  in CAP SA on September 2, 2024 and sell it today you would lose (14,090) from holding CAP SA or give up 2.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.44%
Values	Daily Returns

CAP SA  vs.  Schwager

CAP SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CAP SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, CAP SA is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Schwager

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schwager has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Schwager is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CAP SA and Schwager

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

The idea behind CAP SA and Schwager 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.