Correlation Between Swatch and CHRISTIAN DIOR

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

By analyzing existing cross correlation between The Swatch Group and CHRISTIAN DIOR ADR14EO2, you can compare the effects of market volatilities on Swatch and CHRISTIAN DIOR 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 Swatch with a short position of CHRISTIAN DIOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swatch and CHRISTIAN DIOR.

Diversification Opportunities for Swatch and CHRISTIAN DIOR

0.49

Correlation Coefficient

Swatch  CHRISTIAN DIOR

Very weak diversification

The 3 months correlation between Swatch and CHRISTIAN is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding The Swatch Group and CHRISTIAN DIOR ADR14EO2 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHRISTIAN DIOR ADR14EO2 and Swatch 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 The Swatch Group are associated (or correlated) with CHRISTIAN DIOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHRISTIAN DIOR ADR14EO2 has no effect on the direction of Swatch i.e., Swatch and CHRISTIAN DIOR go up and down completely randomly.

Pair Corralation between Swatch and CHRISTIAN DIOR

Assuming the 90 days trading horizon The Swatch Group is expected to generate 1.38 times more return on investment than CHRISTIAN DIOR. However, Swatch is 1.38 times more volatile than CHRISTIAN DIOR ADR14EO2. It trades about 0.05 of its potential returns per unit of risk. CHRISTIAN DIOR ADR14EO2 is currently generating about 0.06 per unit of risk. If you would invest  765.00  in The Swatch Group on September 23, 2024 and sell it today you would earn a total of  50.00  from holding The Swatch Group or generate 6.54% return on investment over 90 days.

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

The Swatch Group  vs.  CHRISTIAN DIOR ADR14EO2

Swatch Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Swatch Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Swatch may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CHRISTIAN DIOR ADR14EO2

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CHRISTIAN DIOR ADR14EO2 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CHRISTIAN DIOR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Swatch and CHRISTIAN DIOR

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

The idea behind The Swatch Group and CHRISTIAN DIOR ADR14EO2 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.