Correlation Between Swiss Leader and Alpine Select

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

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

Diversification Opportunities for Swiss Leader and Alpine Select

0.15

Correlation Coefficient

Swiss Leader  Alpine Select

Average diversification

The 3 months correlation between Swiss and Alpine is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Leader Price and Alpine Select AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpine Select AG and Swiss Leader 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 Leader Price are associated (or correlated) with Alpine Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpine Select AG has no effect on the direction of Swiss Leader i.e., Swiss Leader and Alpine Select go up and down completely randomly.

Pair Corralation between Swiss Leader and Alpine Select

Assuming the 90 days trading horizon Swiss Leader Price is expected to under-perform the Alpine Select. But the index apears to be less risky and, when comparing its historical volatility, Swiss Leader Price is 1.93 times less risky than Alpine Select. The index trades about -0.02 of its potential returns per unit of risk. The Alpine Select AG is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  750.00  in Alpine Select AG on September 12, 2024 and sell it today you would earn a total of  0.00  from holding Alpine Select AG or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	65.63%
Values	Daily Returns

Swiss Leader Price  vs.  Alpine Select AG

Pair Trading with Swiss Leader and Alpine Select

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

The idea behind Swiss Leader Price and Alpine Select 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.