Correlation Between Mountain Crest and Swiss Life

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

By analyzing existing cross correlation between Mountain Crest Acquisition and Swiss Life Holding, you can compare the effects of market volatilities on Mountain Crest and Swiss Life 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 Mountain Crest with a short position of Swiss Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mountain Crest and Swiss Life.

Diversification Opportunities for Mountain Crest and Swiss Life

0.32

Correlation Coefficient

Mountain Crest  Swiss Life

Weak diversification

The 3 months correlation between Mountain and Swiss is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Mountain Crest Acquisition and Swiss Life Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swiss Life Holding and Mountain Crest 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 Mountain Crest Acquisition are associated (or correlated) with Swiss Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swiss Life Holding has no effect on the direction of Mountain Crest i.e., Mountain Crest and Swiss Life go up and down completely randomly.

Pair Corralation between Mountain Crest and Swiss Life

Given the investment horizon of 90 days Mountain Crest Acquisition is expected to under-perform the Swiss Life. In addition to that, Mountain Crest is 13.55 times more volatile than Swiss Life Holding. It trades about -0.25 of its total potential returns per unit of risk. Swiss Life Holding is currently generating about 0.06 per unit of volatility. If you would invest  2,590  in Swiss Life Holding on October 7, 2024 and sell it today you would earn a total of  1,378  from holding Swiss Life Holding or generate 53.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	7.66%
Values	Daily Returns

Mountain Crest Acquisition  vs.  Swiss Life Holding

Mountain Crest Acqui

Risk-Adjusted Performance

0 of 100

Very Weak

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

Swiss Life Holding

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Mountain Crest and Swiss Life

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

The idea behind Mountain Crest Acquisition and Swiss Life Holding 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.