Correlation Between PX Prague and Swiss Leader

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

By analyzing existing cross correlation between PX Prague Stock and Swiss Leader Price, you can compare the effects of market volatilities on PX Prague and Swiss Leader 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 PX Prague with a short position of Swiss Leader. Check out your portfolio center. Please also check ongoing floating volatility patterns of PX Prague and Swiss Leader.

Diversification Opportunities for PX Prague and Swiss Leader

-0.58

Correlation Coefficient

PX Prague  Swiss Leader

Excellent diversification

The 3 months correlation between PX Prague and Swiss is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding PX Prague Stock and Swiss Leader Price in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swiss Leader Price and PX Prague 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 PX Prague Stock are associated (or correlated) with Swiss Leader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swiss Leader Price has no effect on the direction of PX Prague i.e., PX Prague and Swiss Leader go up and down completely randomly.

Pair Corralation between PX Prague and Swiss Leader

Assuming the 90 days trading horizon PX Prague Stock is expected to generate 0.65 times more return on investment than Swiss Leader. However, PX Prague Stock is 1.54 times less risky than Swiss Leader. It trades about 0.17 of its potential returns per unit of risk. Swiss Leader Price is currently generating about -0.1 per unit of risk. If you would invest  159,452  in PX Prague Stock on August 30, 2024 and sell it today you would earn a total of  8,495  from holding PX Prague Stock or generate 5.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

PX Prague Stock  vs.  Swiss Leader Price

Pair Trading with PX Prague and Swiss Leader

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

The idea behind PX Prague Stock and Swiss Leader Price 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.