Correlation Between Swiss Leader and SPDR FTSE

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

Diversification Opportunities for Swiss Leader and SPDR FTSE

0.57

Correlation Coefficient

Swiss Leader  SPDR FTSE

Very weak diversification

The 3 months correlation between Swiss and SPDR is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Leader Price and SPDR FTSE UK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR FTSE UK 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 SPDR FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR FTSE UK has no effect on the direction of Swiss Leader i.e., Swiss Leader and SPDR FTSE go up and down completely randomly.

Pair Corralation between Swiss Leader and SPDR FTSE

Assuming the 90 days trading horizon Swiss Leader is expected to generate 1.32 times less return on investment than SPDR FTSE. But when comparing it to its historical volatility, Swiss Leader Price is 2.92 times less risky than SPDR FTSE. It trades about 0.05 of its potential returns per unit of risk. SPDR FTSE UK is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  553.00  in SPDR FTSE UK on September 14, 2024 and sell it today you would earn a total of  64.00  from holding SPDR FTSE UK or generate 11.57% return on investment over 90 days.

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

Swiss Leader Price  vs.  SPDR FTSE UK

Pair Trading with Swiss Leader and SPDR FTSE

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

The idea behind Swiss Leader Price and SPDR FTSE UK 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.