Correlation Between Swatch Group and Swissquote Group

Can any of the company-specific risk be diversified away by investing in both Swatch Group and Swissquote 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 Swatch Group and Swissquote Group 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 Swissquote Group Holding, you can compare the effects of market volatilities on Swatch Group and Swissquote 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 Swatch Group with a short position of Swissquote Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swatch Group and Swissquote Group.

Diversification Opportunities for Swatch Group and Swissquote Group

-0.47

Correlation Coefficient

Swatch Group  Swissquote Group

Very good diversification

The 3 months correlation between Swatch and Swissquote is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Swatch Group AG and Swissquote Group Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swissquote Group 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 Swissquote Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swissquote Group Holding has no effect on the direction of Swatch Group i.e., Swatch Group and Swissquote Group go up and down completely randomly.

Pair Corralation between Swatch Group and Swissquote Group

Assuming the 90 days trading horizon Swatch Group is expected to generate 2.19 times less return on investment than Swissquote Group. In addition to that, Swatch Group is 1.48 times more volatile than Swissquote Group Holding. It trades about 0.04 of its total potential returns per unit of risk. Swissquote Group Holding is currently generating about 0.14 per unit of volatility. If you would invest  29,220  in Swissquote Group Holding on September 16, 2024 and sell it today you would earn a total of  4,880  from holding Swissquote Group Holding or generate 16.7% return on investment over 90 days.

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

Swatch Group AG  vs.  Swissquote Group Holding

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.

Swissquote Group Holding

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Swissquote Group Holding are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Swissquote Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Swatch Group and Swissquote Group

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

The idea behind Swatch Group AG and Swissquote Group Holding 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.

Check out your portfolio center.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.