Correlation Between Swiss Leader and Logitech International

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

Diversification Opportunities for Swiss Leader and Logitech International

0.66

Correlation Coefficient

Swiss Leader  Logitech International

Poor diversification

The 3 months correlation between Swiss and Logitech is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Leader Price and Logitech International SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Logitech International 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 Logitech International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Logitech International has no effect on the direction of Swiss Leader i.e., Swiss Leader and Logitech International go up and down completely randomly.

Pair Corralation between Swiss Leader and Logitech International

Assuming the 90 days trading horizon Swiss Leader is expected to generate 3.05 times less return on investment than Logitech International. But when comparing it to its historical volatility, Swiss Leader Price is 2.52 times less risky than Logitech International. It trades about 0.26 of its potential returns per unit of risk. Logitech International SA is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  7,006  in Logitech International SA on November 27, 2024 and sell it today you would earn a total of  2,290  from holding Logitech International SA or generate 32.69% return on investment over 90 days.

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

Swiss Leader Price  vs.  Logitech International SA

Pair Trading with Swiss Leader and Logitech International

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

The idea behind Swiss Leader Price and Logitech International 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.