Correlation Between Alphabet and Swatch Group

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

By analyzing existing cross correlation between Alphabet Inc Class C and Swatch Group AG, you can compare the effects of market volatilities on Alphabet and Swatch Group 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 Alphabet with a short position of Swatch Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Swatch Group.

Diversification Opportunities for Alphabet and Swatch Group

-0.36

Correlation Coefficient

Alphabet  Swatch Group

Very good diversification

The 3 months correlation between Alphabet and Swatch is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Swatch Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swatch Group AG and Alphabet 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 Alphabet Inc Class C are associated (or correlated) with Swatch Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swatch Group AG has no effect on the direction of Alphabet i.e., Alphabet and Swatch Group go up and down completely randomly.

Pair Corralation between Alphabet and Swatch Group

Given the investment horizon of 90 days Alphabet is expected to generate 2.25 times less return on investment than Swatch Group. In addition to that, Alphabet is 1.27 times more volatile than Swatch Group AG. It trades about 0.04 of its total potential returns per unit of risk. Swatch Group AG is currently generating about 0.13 per unit of volatility. If you would invest  15,930  in Swatch Group AG on November 28, 2024 and sell it today you would earn a total of  1,880  from holding Swatch Group AG or generate 11.8% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  Swatch Group AG

Alphabet Class C

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Alphabet is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Swatch Group AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Swatch Group AG are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Swatch Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and Swatch Group

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

The idea behind Alphabet Inc Class C and Swatch Group 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.