Correlation Between Swisscom and SGS SA

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

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

Diversification Opportunities for Swisscom and SGS SA

-0.41

Correlation Coefficient

Swisscom  SGS SA

Very good diversification

The 3 months correlation between Swisscom and SGS is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Swisscom AG and SGS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGS SA and Swisscom 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 Swisscom AG are associated (or correlated) with SGS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGS SA has no effect on the direction of Swisscom i.e., Swisscom and SGS SA go up and down completely randomly.

Pair Corralation between Swisscom and SGS SA

Assuming the 90 days trading horizon Swisscom AG is expected to generate 0.51 times more return on investment than SGS SA. However, Swisscom AG is 1.96 times less risky than SGS SA. It trades about 0.12 of its potential returns per unit of risk. SGS SA is currently generating about -0.02 per unit of risk. If you would invest  50,300  in Swisscom AG on December 27, 2024 and sell it today you would earn a total of  3,100  from holding Swisscom AG or generate 6.16% return on investment over 90 days.

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

Swisscom AG  vs.  SGS SA

Swisscom AG

Risk-Adjusted Performance

OK

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

SGS SA

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Swisscom and SGS SA

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

The idea behind Swisscom AG and SGS SA 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.