Correlation Between Swatch Group and Helvetia Holding

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

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

Diversification Opportunities for Swatch Group and Helvetia Holding

0.28

Correlation Coefficient

Swatch Group  Helvetia Holding

Modest diversification

The 3 months correlation between Swatch and Helvetia is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Swatch Group AG and Helvetia Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Helvetia Holding and Swatch 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 Swatch Group AG are associated (or correlated) with Helvetia Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Helvetia Holding has no effect on the direction of Swatch Group i.e., Swatch Group and Helvetia Holding go up and down completely randomly.

Pair Corralation between Swatch Group and Helvetia Holding

Assuming the 90 days trading horizon Swatch Group AG is expected to under-perform the Helvetia Holding. In addition to that, Swatch Group is 1.13 times more volatile than Helvetia Holding AG. It trades about -0.12 of its total potential returns per unit of risk. Helvetia Holding AG is currently generating about -0.1 per unit of volatility. If you would invest  14,970  in Helvetia Holding AG on September 16, 2024 and sell it today you would lose (330.00) from holding Helvetia Holding AG or give up 2.2% of portfolio value over 90 days.

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

Swatch Group AG  vs.  Helvetia Holding AG

Swatch Group AG

Risk-Adjusted Performance

3 of 100

Insignificant

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

Helvetia Holding

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Helvetia Holding AG are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Helvetia Holding may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Swatch Group and Helvetia Holding

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

The idea behind Swatch Group AG and Helvetia Holding AG 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.