Correlation Between SWISS WATER and Fair Isaac

Can any of the company-specific risk be diversified away by investing in both SWISS WATER and Fair Isaac 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 WATER and Fair Isaac into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SWISS WATER DECAFFCOFFEE and Fair Isaac Corp, you can compare the effects of market volatilities on SWISS WATER and Fair Isaac 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 WATER with a short position of Fair Isaac. Check out your portfolio center. Please also check ongoing floating volatility patterns of SWISS WATER and Fair Isaac.

Diversification Opportunities for SWISS WATER and Fair Isaac

0.82

Correlation Coefficient

SWISS WATER  Fair Isaac

Very poor diversification

The 3 months correlation between SWISS and Fair is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding SWISS WATER DECAFFCOFFEE and Fair Isaac Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fair Isaac Corp and SWISS WATER 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 WATER DECAFFCOFFEE are associated (or correlated) with Fair Isaac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fair Isaac Corp has no effect on the direction of SWISS WATER i.e., SWISS WATER and Fair Isaac go up and down completely randomly.

Pair Corralation between SWISS WATER and Fair Isaac

Assuming the 90 days horizon SWISS WATER is expected to generate 1.7 times less return on investment than Fair Isaac. In addition to that, SWISS WATER is 1.18 times more volatile than Fair Isaac Corp. It trades about 0.09 of its total potential returns per unit of risk. Fair Isaac Corp is currently generating about 0.17 per unit of volatility. If you would invest  169,200  in Fair Isaac Corp on September 14, 2024 and sell it today you would earn a total of  42,400  from holding Fair Isaac Corp or generate 25.06% return on investment over 90 days.

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

SWISS WATER DECAFFCOFFEE  vs.  Fair Isaac Corp

SWISS WATER DECAFFCOFFEE

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SWISS WATER DECAFFCOFFEE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SWISS WATER reported solid returns over the last few months and may actually be approaching a breakup point.

Fair Isaac Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fair Isaac Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fair Isaac unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SWISS WATER and Fair Isaac

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

The idea behind SWISS WATER DECAFFCOFFEE and Fair Isaac Corp 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.