Correlation Between Freedom Day and SWP Growth

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

By analyzing existing cross correlation between Freedom Day Dividend and SWP Growth Income, you can compare the effects of market volatilities on Freedom Day and SWP Growth 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 Freedom Day with a short position of SWP Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freedom Day and SWP Growth.

Diversification Opportunities for Freedom Day and SWP Growth

0.74

Correlation Coefficient

Freedom Day  SWP Growth

Poor diversification

The 3 months correlation between Freedom and SWP is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Day Dividend and SWP Growth Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SWP Growth Income and Freedom Day 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 Freedom Day Dividend are associated (or correlated) with SWP Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SWP Growth Income has no effect on the direction of Freedom Day i.e., Freedom Day and SWP Growth go up and down completely randomly.

Pair Corralation between Freedom Day and SWP Growth

Given the investment horizon of 90 days Freedom Day Dividend is expected to under-perform the SWP Growth. In addition to that, Freedom Day is 1.09 times more volatile than SWP Growth Income. It trades about -0.02 of its total potential returns per unit of risk. SWP Growth Income is currently generating about 0.03 per unit of volatility. If you would invest  2,486  in SWP Growth Income on October 3, 2024 and sell it today you would earn a total of  31.00  from holding SWP Growth Income or generate 1.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	80.95%
Values	Daily Returns

Freedom Day Dividend  vs.  SWP Growth Income

Freedom Day Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freedom Day Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Freedom Day is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

SWP Growth Income

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SWP Growth Income are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, SWP Growth is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Freedom Day and SWP Growth

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

The idea behind Freedom Day Dividend and SWP Growth Income 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.