Correlation Between Swiss Leader and SF Sustainable

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

Diversification Opportunities for Swiss Leader and SF Sustainable

-0.14

Correlation Coefficient

Swiss Leader  SF Sustainable

Good diversification

The 3 months correlation between Swiss and SFPF is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Leader Price and SF Sustainable Property in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SF Sustainable Property 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 SF Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SF Sustainable Property has no effect on the direction of Swiss Leader i.e., Swiss Leader and SF Sustainable go up and down completely randomly.

Pair Corralation between Swiss Leader and SF Sustainable

Assuming the 90 days trading horizon Swiss Leader Price is expected to under-perform the SF Sustainable. But the index apears to be less risky and, when comparing its historical volatility, Swiss Leader Price is 1.45 times less risky than SF Sustainable. The index trades about -0.08 of its potential returns per unit of risk. The SF Sustainable Property is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  12,650  in SF Sustainable Property on September 27, 2024 and sell it today you would earn a total of  300.00  from holding SF Sustainable Property or generate 2.37% 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.  SF Sustainable Property

Pair Trading with Swiss Leader and SF Sustainable

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

The idea behind Swiss Leader Price and SF Sustainable Property 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.