Correlation Between China Communications and Schweizer Electronic

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

By analyzing existing cross correlation between China Communications Services and Schweizer Electronic AG, you can compare the effects of market volatilities on China Communications and Schweizer Electronic 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 China Communications with a short position of Schweizer Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Communications and Schweizer Electronic.

Diversification Opportunities for China Communications and Schweizer Electronic

0.09

Correlation Coefficient

China Communications  Schweizer Electronic

Significant diversification

The 3 months correlation between China and Schweizer is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding China Communications Services and Schweizer Electronic AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schweizer Electronic and China Communications 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 China Communications Services are associated (or correlated) with Schweizer Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schweizer Electronic has no effect on the direction of China Communications i.e., China Communications and Schweizer Electronic go up and down completely randomly.

Pair Corralation between China Communications and Schweizer Electronic

Assuming the 90 days horizon China Communications is expected to generate 16.91 times less return on investment than Schweizer Electronic. But when comparing it to its historical volatility, China Communications Services is 6.13 times less risky than Schweizer Electronic. It trades about 0.04 of its potential returns per unit of risk. Schweizer Electronic AG is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  260.00  in Schweizer Electronic AG on December 22, 2024 and sell it today you would earn a total of  315.00  from holding Schweizer Electronic AG or generate 121.15% return on investment over 90 days.

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

China Communications Services  vs.  Schweizer Electronic AG

China Communications

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Communications Services are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Communications may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Schweizer Electronic

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Schweizer Electronic AG are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Schweizer Electronic reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Communications and Schweizer Electronic

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

The idea behind China Communications Services and Schweizer Electronic AG 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.