Correlation Between Swiss Leader and SIG Combibloc

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

Diversification Opportunities for Swiss Leader and SIG Combibloc

0.43

Correlation Coefficient

Swiss Leader  SIG Combibloc

Very weak diversification

The 3 months correlation between Swiss and SIG is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Leader Price and SIG Combibloc Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIG Combibloc Group 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 SIG Combibloc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIG Combibloc Group has no effect on the direction of Swiss Leader i.e., Swiss Leader and SIG Combibloc go up and down completely randomly.

Pair Corralation between Swiss Leader and SIG Combibloc

Assuming the 90 days trading horizon Swiss Leader Price is expected to under-perform the SIG Combibloc. But the index apears to be less risky and, when comparing its historical volatility, Swiss Leader Price is 2.51 times less risky than SIG Combibloc. The index trades about -0.02 of its potential returns per unit of risk. The SIG Combibloc Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,670  in SIG Combibloc Group on September 12, 2024 and sell it today you would earn a total of  116.00  from holding SIG Combibloc Group or generate 6.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Swiss Leader Price  vs.  SIG Combibloc Group

Pair Trading with Swiss Leader and SIG Combibloc

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

The idea behind Swiss Leader Price and SIG Combibloc Group 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.