Correlation Between SWP Growth and Freedom Day

Can any of the company-specific risk be diversified away by investing in both SWP Growth and Freedom Day 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 SWP Growth and Freedom Day into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SWP Growth Income and Freedom Day Dividend, you can compare the effects of market volatilities on SWP Growth and Freedom Day 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 SWP Growth with a short position of Freedom Day. Check out your portfolio center. Please also check ongoing floating volatility patterns of SWP Growth and Freedom Day.

Diversification Opportunities for SWP Growth and Freedom Day

0.78

Correlation Coefficient

SWP Growth  Freedom Day

Poor diversification

The 3 months correlation between SWP and Freedom is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding SWP Growth Income and Freedom Day Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Day Dividend and SWP Growth 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 SWP Growth Income are associated (or correlated) with Freedom Day. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Day Dividend has no effect on the direction of SWP Growth i.e., SWP Growth and Freedom Day go up and down completely randomly.

Pair Corralation between SWP Growth and Freedom Day

Considering the 90-day investment horizon SWP Growth Income is expected to generate 0.91 times more return on investment than Freedom Day. However, SWP Growth Income is 1.1 times less risky than Freedom Day. It trades about 0.04 of its potential returns per unit of risk. Freedom Day Dividend is currently generating about -0.06 per unit of risk. If you would invest  2,486  in SWP Growth Income on September 23, 2024 and sell it today you would earn a total of  40.00  from holding SWP Growth Income or generate 1.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.92%
Values	Daily Returns

SWP Growth Income  vs.  Freedom Day Dividend

SWP Growth Income

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SWP Growth Income are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, SWP Growth is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Freedom Day Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freedom Day Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Freedom Day is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SWP Growth and Freedom Day

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

The idea behind SWP Growth Income and Freedom Day Dividend 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.