Correlation Between Metall Zug and Schweiter Technologies

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

By analyzing existing cross correlation between Metall Zug AG and Schweiter Technologies AG, you can compare the effects of market volatilities on Metall Zug and Schweiter Technologies 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 Metall Zug with a short position of Schweiter Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metall Zug and Schweiter Technologies.

Diversification Opportunities for Metall Zug and Schweiter Technologies

-0.7

Correlation Coefficient

Metall Zug  Schweiter Technologies

Excellent diversification

The 3 months correlation between Metall and Schweiter is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Metall Zug AG and Schweiter Technologies AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schweiter Technologies and Metall Zug 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 Metall Zug AG are associated (or correlated) with Schweiter Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schweiter Technologies has no effect on the direction of Metall Zug i.e., Metall Zug and Schweiter Technologies go up and down completely randomly.

Pair Corralation between Metall Zug and Schweiter Technologies

Assuming the 90 days trading horizon Metall Zug AG is expected to under-perform the Schweiter Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Metall Zug AG is 1.33 times less risky than Schweiter Technologies. The stock trades about -0.08 of its potential returns per unit of risk. The Schweiter Technologies AG is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  74,847  in Schweiter Technologies AG on November 19, 2024 and sell it today you would lose (27,647) from holding Schweiter Technologies AG or give up 36.94% of portfolio value over 90 days.

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

Metall Zug AG  vs.  Schweiter Technologies AG

Metall Zug AG

Risk-Adjusted Performance

Very Weak

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

Schweiter Technologies

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Schweiter Technologies AG are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Schweiter Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metall Zug and Schweiter Technologies

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

The idea behind Metall Zug AG and Schweiter Technologies 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.