Correlation Between Swiss Leader and Schindler

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

Diversification Opportunities for Swiss Leader and Schindler

-0.15

Correlation Coefficient

Swiss Leader  Schindler

Good diversification

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

Pair Corralation between Swiss Leader and Schindler

Assuming the 90 days trading horizon Swiss Leader Price is expected to under-perform the Schindler. But the index apears to be less risky and, when comparing its historical volatility, Swiss Leader Price is 1.56 times less risky than Schindler. The index trades about -0.02 of its potential returns per unit of risk. The Schindler Ps is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  24,160  in Schindler Ps on September 15, 2024 and sell it today you would earn a total of  1,680  from holding Schindler Ps or generate 6.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

Swiss Leader Price  vs.  Schindler Ps

Pair Trading with Swiss Leader and Schindler

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

The idea behind Swiss Leader Price and Schindler Ps 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.