Correlation Between Swiss Leader and Synchrony Swiss

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

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

Diversification Opportunities for Swiss Leader and Synchrony Swiss

-0.36

Correlation Coefficient

Swiss Leader  Synchrony Swiss

Very good diversification

The 3 months correlation between Swiss and Synchrony is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Leader Price and Synchrony Swiss Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synchrony Swiss Real and Swiss Leader 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 Swiss Leader Price are associated (or correlated) with Synchrony Swiss. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synchrony Swiss Real has no effect on the direction of Swiss Leader i.e., Swiss Leader and Synchrony Swiss go up and down completely randomly.

Pair Corralation between Swiss Leader and Synchrony Swiss

Assuming the 90 days trading horizon Swiss Leader Price is expected to under-perform the Synchrony Swiss. In addition to that, Swiss Leader is 1.4 times more volatile than Synchrony Swiss Real. It trades about -0.08 of its total potential returns per unit of risk. Synchrony Swiss Real is currently generating about 0.28 per unit of volatility. If you would invest  11,960  in Synchrony Swiss Real on September 27, 2024 and sell it today you would earn a total of  308.00  from holding Synchrony Swiss Real or generate 2.58% return on investment over 90 days.

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

Swiss Leader Price  vs.  Synchrony Swiss Real

Pair Trading with Swiss Leader and Synchrony Swiss

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

The idea behind Swiss Leader Price and Synchrony Swiss Real 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.