Correlation Between Swisscom and Helvetia Holding

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

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

Diversification Opportunities for Swisscom and Helvetia Holding

-0.36

Correlation Coefficient

Swisscom  Helvetia Holding

Very good diversification

The 3 months correlation between Swisscom and Helvetia is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Swisscom AG and Helvetia Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Helvetia Holding and Swisscom 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 Swisscom AG are associated (or correlated) with Helvetia Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Helvetia Holding has no effect on the direction of Swisscom i.e., Swisscom and Helvetia Holding go up and down completely randomly.

Pair Corralation between Swisscom and Helvetia Holding

Assuming the 90 days trading horizon Swisscom AG is expected to under-perform the Helvetia Holding. But the stock apears to be less risky and, when comparing its historical volatility, Swisscom AG is 1.15 times less risky than Helvetia Holding. The stock trades about -0.14 of its potential returns per unit of risk. The Helvetia Holding AG is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  13,520  in Helvetia Holding AG on September 12, 2024 and sell it today you would earn a total of  1,620  from holding Helvetia Holding AG or generate 11.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Swisscom AG  vs.  Helvetia Holding AG

Swisscom AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Swisscom AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Helvetia Holding

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Helvetia Holding AG are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Helvetia Holding may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Swisscom and Helvetia Holding

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

The idea behind Swisscom AG and Helvetia Holding AG 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.