Correlation Between Swiss Leader and La Foncire

Can any of the company-specific risk be diversified away by investing in both Swiss Leader and La Foncire 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 La Foncire 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 La Foncire, you can compare the effects of market volatilities on Swiss Leader and La Foncire 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 La Foncire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swiss Leader and La Foncire.

Diversification Opportunities for Swiss Leader and La Foncire

-0.61

Correlation Coefficient

Swiss Leader  La Foncire

Excellent diversification

The 3 months correlation between Swiss and FOC is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Leader Price and La Foncire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on La Foncire 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 La Foncire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of La Foncire has no effect on the direction of Swiss Leader i.e., Swiss Leader and La Foncire go up and down completely randomly.

Pair Corralation between Swiss Leader and La Foncire

Assuming the 90 days trading horizon Swiss Leader is expected to generate 1.89 times less return on investment than La Foncire. But when comparing it to its historical volatility, Swiss Leader Price is 1.2 times less risky than La Foncire. It trades about 0.05 of its potential returns per unit of risk. La Foncire is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  12,255  in La Foncire on September 26, 2024 and sell it today you would earn a total of  2,945  from holding La Foncire or generate 24.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.68%
Values	Daily Returns

Swiss Leader Price  vs.  La Foncire

Pair Trading with Swiss Leader and La Foncire

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

The idea behind Swiss Leader Price and La Foncire 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.