Correlation Between PSP Swiss and Swiss Prime

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

By analyzing existing cross correlation between PSP Swiss Property and Swiss Prime Site, you can compare the effects of market volatilities on PSP Swiss and Swiss Prime 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 PSP Swiss with a short position of Swiss Prime. Check out your portfolio center. Please also check ongoing floating volatility patterns of PSP Swiss and Swiss Prime.

Diversification Opportunities for PSP Swiss and Swiss Prime

0.93

Correlation Coefficient

PSP Swiss  Swiss Prime

Almost no diversification

The 3 months correlation between PSP and Swiss is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding PSP Swiss Property and Swiss Prime Site in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swiss Prime Site and PSP Swiss 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 PSP Swiss Property are associated (or correlated) with Swiss Prime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swiss Prime Site has no effect on the direction of PSP Swiss i.e., PSP Swiss and Swiss Prime go up and down completely randomly.

Pair Corralation between PSP Swiss and Swiss Prime

Assuming the 90 days trading horizon PSP Swiss is expected to generate 1.5 times less return on investment than Swiss Prime. But when comparing it to its historical volatility, PSP Swiss Property is 1.03 times less risky than Swiss Prime. It trades about 0.13 of its potential returns per unit of risk. Swiss Prime Site is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  9,720  in Swiss Prime Site on December 28, 2024 and sell it today you would earn a total of  960.00  from holding Swiss Prime Site or generate 9.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

PSP Swiss Property  vs.  Swiss Prime Site

PSP Swiss Property

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PSP Swiss Property are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, PSP Swiss may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Swiss Prime Site

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Swiss Prime Site are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Swiss Prime may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with PSP Swiss and Swiss Prime

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

The idea behind PSP Swiss Property and Swiss Prime Site 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 Global Correlations module to find global opportunities by holding instruments from different markets.