Correlation Between Swiss Leader and Dorma Kaba

Can any of the company-specific risk be diversified away by investing in both Swiss Leader and Dorma Kaba 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 Dorma Kaba 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 Dorma Kaba Holding, you can compare the effects of market volatilities on Swiss Leader and Dorma Kaba 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 Dorma Kaba. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swiss Leader and Dorma Kaba.

Diversification Opportunities for Swiss Leader and Dorma Kaba

-0.32

Correlation Coefficient

Swiss Leader  Dorma Kaba

Very good diversification

The 3 months correlation between Swiss and Dorma is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Leader Price and Dorma Kaba Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dorma Kaba Holding 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 Dorma Kaba. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dorma Kaba Holding has no effect on the direction of Swiss Leader i.e., Swiss Leader and Dorma Kaba go up and down completely randomly.

Pair Corralation between Swiss Leader and Dorma Kaba

Assuming the 90 days trading horizon Swiss Leader is expected to generate 3.51 times less return on investment than Dorma Kaba. But when comparing it to its historical volatility, Swiss Leader Price is 1.94 times less risky than Dorma Kaba. It trades about 0.02 of its potential returns per unit of risk. Dorma Kaba Holding is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  65,200  in Dorma Kaba Holding on September 5, 2024 and sell it today you would earn a total of  700.00  from holding Dorma Kaba Holding or generate 1.07% return on investment over 90 days.

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

Swiss Leader Price  vs.  Dorma Kaba Holding

Pair Trading with Swiss Leader and Dorma Kaba

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

The idea behind Swiss Leader Price and Dorma Kaba Holding 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.