Correlation Between Sovereign Metals and Swatch Group

Can any of the company-specific risk be diversified away by investing in both Sovereign Metals and Swatch Group 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 Sovereign Metals and Swatch Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sovereign Metals Limited and The Swatch Group, you can compare the effects of market volatilities on Sovereign Metals and Swatch Group 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 Sovereign Metals with a short position of Swatch Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sovereign Metals and Swatch Group.

Diversification Opportunities for Sovereign Metals and Swatch Group

-0.49

Correlation Coefficient

Sovereign Metals  Swatch Group

Very good diversification

The 3 months correlation between Sovereign and Swatch is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Sovereign Metals Limited and The Swatch Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swatch Group and Sovereign Metals 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 Sovereign Metals Limited are associated (or correlated) with Swatch Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swatch Group has no effect on the direction of Sovereign Metals i.e., Sovereign Metals and Swatch Group go up and down completely randomly.

Pair Corralation between Sovereign Metals and Swatch Group

Assuming the 90 days horizon Sovereign Metals Limited is expected to generate 1.19 times more return on investment than Swatch Group. However, Sovereign Metals is 1.19 times more volatile than The Swatch Group. It trades about 0.06 of its potential returns per unit of risk. The Swatch Group is currently generating about -0.02 per unit of risk. If you would invest  27.00  in Sovereign Metals Limited on October 4, 2024 and sell it today you would earn a total of  17.00  from holding Sovereign Metals Limited or generate 62.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Sovereign Metals Limited  vs.  The Swatch Group

Sovereign Metals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sovereign Metals Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sovereign Metals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Swatch Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Swatch Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Sovereign Metals and Swatch Group

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

The idea behind Sovereign Metals Limited and The Swatch 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.