Correlation Between Selected American and Credit Suisse

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

By analyzing existing cross correlation between Selected American Shares and Credit Suisse Modity, you can compare the effects of market volatilities on Selected American and Credit Suisse 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 Selected American with a short position of Credit Suisse. Check out your portfolio center. Please also check ongoing floating volatility patterns of Selected American and Credit Suisse.

Diversification Opportunities for Selected American and Credit Suisse

-0.04

Correlation Coefficient

Selected American  Credit Suisse

Good diversification

The 3 months correlation between Selected and Credit is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Selected American Shares and Credit Suisse Modity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Suisse Modity and Selected American 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 Selected American Shares are associated (or correlated) with Credit Suisse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Suisse Modity has no effect on the direction of Selected American i.e., Selected American and Credit Suisse go up and down completely randomly.

Pair Corralation between Selected American and Credit Suisse

Assuming the 90 days horizon Selected American Shares is expected to under-perform the Credit Suisse. In addition to that, Selected American is 2.32 times more volatile than Credit Suisse Modity. It trades about -0.04 of its total potential returns per unit of risk. Credit Suisse Modity is currently generating about 0.05 per unit of volatility. If you would invest  2,208  in Credit Suisse Modity on September 17, 2024 and sell it today you would earn a total of  54.00  from holding Credit Suisse Modity or generate 2.45% return on investment over 90 days.

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

Selected American Shares  vs.  Credit Suisse Modity

Selected American Shares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Selected American Shares has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Selected American is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Credit Suisse Modity

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Credit Suisse Modity are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Credit Suisse is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Selected American and Credit Suisse

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

The idea behind Selected American Shares and Credit Suisse Modity 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.