Correlation Between Swatch Group and Salvatore Ferragamo

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

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

Diversification Opportunities for Swatch Group and Salvatore Ferragamo

0.7

Correlation Coefficient

Swatch Group  Salvatore Ferragamo

Poor diversification

The 3 months correlation between Swatch and Salvatore is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Swatch Group AG and Salvatore Ferragamo SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salvatore Ferragamo SpA and Swatch Group 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 Swatch Group AG are associated (or correlated) with Salvatore Ferragamo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salvatore Ferragamo SpA has no effect on the direction of Swatch Group i.e., Swatch Group and Salvatore Ferragamo go up and down completely randomly.

Pair Corralation between Swatch Group and Salvatore Ferragamo

Assuming the 90 days horizon Swatch Group AG is expected to under-perform the Salvatore Ferragamo. But the pink sheet apears to be less risky and, when comparing its historical volatility, Swatch Group AG is 1.96 times less risky than Salvatore Ferragamo. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Salvatore Ferragamo SpA is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  351.00  in Salvatore Ferragamo SpA on December 30, 2024 and sell it today you would lose (13.00) from holding Salvatore Ferragamo SpA or give up 3.7% of portfolio value over 90 days.

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

Swatch Group AG  vs.  Salvatore Ferragamo SpA

Swatch Group AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Swatch Group AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Swatch Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Salvatore Ferragamo SpA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Salvatore Ferragamo SpA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Salvatore Ferragamo is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Swatch Group and Salvatore Ferragamo

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

The idea behind Swatch Group AG and Salvatore Ferragamo SpA 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.