Correlation Between Swiss Leader and Bergbahnen Engelberg

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

Diversification Opportunities for Swiss Leader and Bergbahnen Engelberg

0.68

Correlation Coefficient

Swiss Leader  Bergbahnen Engelberg

Poor diversification

The 3 months correlation between Swiss and Bergbahnen is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Leader Price and Bergbahnen Engelberg Truebsee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bergbahnen Engelberg 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 Bergbahnen Engelberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bergbahnen Engelberg has no effect on the direction of Swiss Leader i.e., Swiss Leader and Bergbahnen Engelberg go up and down completely randomly.

Pair Corralation between Swiss Leader and Bergbahnen Engelberg

Assuming the 90 days trading horizon Swiss Leader Price is expected to generate 0.99 times more return on investment than Bergbahnen Engelberg. However, Swiss Leader Price is 1.01 times less risky than Bergbahnen Engelberg. It trades about 0.04 of its potential returns per unit of risk. Bergbahnen Engelberg Truebsee is currently generating about -0.27 per unit of risk. If you would invest  192,734  in Swiss Leader Price on September 13, 2024 and sell it today you would earn a total of  883.00  from holding Swiss Leader Price or generate 0.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Swiss Leader Price  vs.  Bergbahnen Engelberg Truebsee

Pair Trading with Swiss Leader and Bergbahnen Engelberg

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

The idea behind Swiss Leader Price and Bergbahnen Engelberg Truebsee 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.