Correlation Between SQLI SA and Sword Group

Can any of the company-specific risk be diversified away by investing in both SQLI SA and Sword Group 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 SQLI SA and Sword Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SQLI SA and Sword Group SE, you can compare the effects of market volatilities on SQLI SA and Sword Group 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 SQLI SA with a short position of Sword Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of SQLI SA and Sword Group.

Diversification Opportunities for SQLI SA and Sword Group

0.4

Correlation Coefficient

SQLI SA  Sword Group

Very weak diversification

The 3 months correlation between SQLI and Sword is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding SQLI SA and Sword Group SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sword Group SE and SQLI SA 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 SQLI SA are associated (or correlated) with Sword Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sword Group SE has no effect on the direction of SQLI SA i.e., SQLI SA and Sword Group go up and down completely randomly.

Pair Corralation between SQLI SA and Sword Group

Assuming the 90 days trading horizon SQLI SA is expected to generate 2.29 times more return on investment than Sword Group. However, SQLI SA is 2.29 times more volatile than Sword Group SE. It trades about 0.12 of its potential returns per unit of risk. Sword Group SE is currently generating about 0.11 per unit of risk. If you would invest  3,940  in SQLI SA on September 5, 2024 and sell it today you would earn a total of  1,460  from holding SQLI SA or generate 37.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

SQLI SA  vs.  Sword Group SE

SQLI SA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SQLI SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, SQLI SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Sword Group SE

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sword Group SE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sword Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SQLI SA and Sword Group

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

The idea behind SQLI SA and Sword Group SE 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..