Correlation Between Wavestone and Sword Group

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

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

Diversification Opportunities for Wavestone and Sword Group

0.0

Correlation Coefficient

Wavestone  Sword Group

Pay attention - limited upside

The 3 months correlation between Wavestone and Sword is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Wavestone SA and Sword Group SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sword Group SE and Wavestone 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 Wavestone SA are associated (or correlated) with Sword Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sword Group SE has no effect on the direction of Wavestone i.e., Wavestone and Sword Group go up and down completely randomly.

Pair Corralation between Wavestone and Sword Group

Assuming the 90 days trading horizon Wavestone SA is expected to under-perform the Sword Group. But the stock apears to be less risky and, when comparing its historical volatility, Wavestone SA is 1.02 times less risky than Sword Group. The stock trades about -0.15 of its potential returns per unit of risk. The Sword Group SE is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,075  in Sword Group SE on September 4, 2024 and sell it today you would earn a total of  425.00  from holding Sword Group SE or generate 13.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Wavestone SA  vs.  Sword Group SE

Wavestone SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wavestone SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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.

Pair Trading with Wavestone and Sword Group

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

The idea behind Wavestone SA and Sword Group SE 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.