Correlation Between SwissCom and Lumen Technologies

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

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

Diversification Opportunities for SwissCom and Lumen Technologies

-0.19

Correlation Coefficient

SwissCom  Lumen Technologies

Good diversification

The 3 months correlation between SwissCom and Lumen is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding SwissCom AG and Lumen Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumen Technologies 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 Lumen Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumen Technologies has no effect on the direction of SwissCom i.e., SwissCom and Lumen Technologies go up and down completely randomly.

Pair Corralation between SwissCom and Lumen Technologies

Assuming the 90 days horizon SwissCom AG is expected to under-perform the Lumen Technologies. But the pink sheet apears to be less risky and, when comparing its historical volatility, SwissCom AG is 11.04 times less risky than Lumen Technologies. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Lumen Technologies is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  267.00  in Lumen Technologies on September 28, 2024 and sell it today you would earn a total of  300.00  from holding Lumen Technologies or generate 112.36% return on investment over 90 days.

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

SwissCom AG  vs.  Lumen Technologies

SwissCom AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SwissCom AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Lumen Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lumen Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with SwissCom and Lumen Technologies

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

The idea behind SwissCom AG and Lumen Technologies 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.