Correlation Between Sword Group and SQLI SA

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

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

Diversification Opportunities for Sword Group and SQLI SA

0.42

Correlation Coefficient

Sword Group  SQLI SA

Very weak diversification

The 3 months correlation between Sword and SQLI is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Sword Group SE and SQLI SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SQLI SA and Sword Group 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 Sword Group SE are associated (or correlated) with SQLI SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SQLI SA has no effect on the direction of Sword Group i.e., Sword Group and SQLI SA go up and down completely randomly.

Pair Corralation between Sword Group and SQLI SA

Assuming the 90 days trading horizon Sword Group SE is expected to under-perform the SQLI SA. But the stock apears to be less risky and, when comparing its historical volatility, Sword Group SE is 1.66 times less risky than SQLI SA. The stock trades about 0.0 of its potential returns per unit of risk. The SQLI SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,272  in SQLI SA on September 4, 2024 and sell it today you would earn a total of  1,128  from holding SQLI SA or generate 26.4% return on investment over 90 days.

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

Sword Group SE  vs.  SQLI SA

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.

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.

Pair Trading with Sword Group and SQLI SA

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

The idea behind Sword Group SE and SQLI SA 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 Global Correlations module to find global opportunities by holding instruments from different markets.