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

-0.15

Correlation Coefficient

Alphabet  Swatch Group

Good diversification

The 3 months correlation between Alphabet and Swatch is -0.15. 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 Inc Class C is expected to under-perform the Swatch Group. In addition to that, Alphabet is 1.15 times more volatile than Swatch Group AG. It trades about -0.16 of its total potential returns per unit of risk. Swatch Group AG is currently generating about -0.04 per unit of volatility. If you would invest  16,500  in Swatch Group AG on December 30, 2024 and sell it today you would lose (850.00) from holding Swatch Group AG or give up 5.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Alphabet Inc Class C  vs.  Swatch Group AG

Alphabet Class C

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Inc Class C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Swatch Group AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Swatch Group AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Swatch Group is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.