Correlation Between Swiss Leader and VanEck Uranium

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

Diversification Opportunities for Swiss Leader and VanEck Uranium

-0.12

Correlation Coefficient

Swiss Leader  VanEck Uranium

Good diversification

The 3 months correlation between Swiss and VanEck is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Leader Price and VanEck Uranium and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Uranium 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 VanEck Uranium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Uranium has no effect on the direction of Swiss Leader i.e., Swiss Leader and VanEck Uranium go up and down completely randomly.

Pair Corralation between Swiss Leader and VanEck Uranium

Assuming the 90 days trading horizon Swiss Leader Price is expected to generate 0.29 times more return on investment than VanEck Uranium. However, Swiss Leader Price is 3.5 times less risky than VanEck Uranium. It trades about 0.18 of its potential returns per unit of risk. VanEck Uranium and is currently generating about -0.08 per unit of risk. If you would invest  191,712  in Swiss Leader Price on December 29, 2024 and sell it today you would earn a total of  15,691  from holding Swiss Leader Price or generate 8.18% 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.  VanEck Uranium and

Pair Trading with Swiss Leader and VanEck Uranium

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

The idea behind Swiss Leader Price and VanEck Uranium and 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.