Correlation Between Swiss Life and Swatch Group

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

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

Diversification Opportunities for Swiss Life and Swatch Group

-0.04

Correlation Coefficient

Swiss Life  Swatch Group

Good diversification

The 3 months correlation between Swiss and Swatch is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Life Holding and Swatch Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swatch Group AG and Swiss Life 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 Life Holding 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 AG has no effect on the direction of Swiss Life i.e., Swiss Life and Swatch Group go up and down completely randomly.

Pair Corralation between Swiss Life and Swatch Group

Assuming the 90 days trading horizon Swiss Life Holding is expected to under-perform the Swatch Group. In addition to that, Swiss Life is 1.12 times more volatile than Swatch Group AG. It trades about -0.14 of its total potential returns per unit of risk. Swatch Group AG is currently generating about -0.1 per unit of volatility. If you would invest  3,300  in Swatch Group AG on September 17, 2024 and sell it today you would lose (80.00) from holding Swatch Group AG or give up 2.42% of portfolio value over 90 days.

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

Swiss Life Holding  vs.  Swatch Group AG

Swiss Life Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Swiss Life Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Swiss Life is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Swatch Group AG

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Swatch Group AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Swatch Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Swiss Life and Swatch Group

The main advantage of trading using opposite Swiss Life and Swatch Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swiss Life 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 Swiss Life Holding and Swatch Group 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.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.