Correlation Between GEAR4MUSIC and SWISS WATER

Can any of the company-specific risk be diversified away by investing in both GEAR4MUSIC and SWISS WATER 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 GEAR4MUSIC and SWISS WATER into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GEAR4MUSIC LS 10 and SWISS WATER DECAFFCOFFEE, you can compare the effects of market volatilities on GEAR4MUSIC and SWISS WATER 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 GEAR4MUSIC with a short position of SWISS WATER. Check out your portfolio center. Please also check ongoing floating volatility patterns of GEAR4MUSIC and SWISS WATER.

Diversification Opportunities for GEAR4MUSIC and SWISS WATER

0.78

Correlation Coefficient

GEAR4MUSIC  SWISS WATER

Poor diversification

The 3 months correlation between GEAR4MUSIC and SWISS is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding GEAR4MUSIC LS 10 and SWISS WATER DECAFFCOFFEE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SWISS WATER DECAFFCOFFEE and GEAR4MUSIC 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 GEAR4MUSIC LS 10 are associated (or correlated) with SWISS WATER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SWISS WATER DECAFFCOFFEE has no effect on the direction of GEAR4MUSIC i.e., GEAR4MUSIC and SWISS WATER go up and down completely randomly.

Pair Corralation between GEAR4MUSIC and SWISS WATER

Assuming the 90 days horizon GEAR4MUSIC LS 10 is expected to generate 1.14 times more return on investment than SWISS WATER. However, GEAR4MUSIC is 1.14 times more volatile than SWISS WATER DECAFFCOFFEE. It trades about 0.18 of its potential returns per unit of risk. SWISS WATER DECAFFCOFFEE is currently generating about 0.12 per unit of risk. If you would invest  166.00  in GEAR4MUSIC LS 10 on April 24, 2025 and sell it today you would earn a total of  86.00  from holding GEAR4MUSIC LS 10 or generate 51.81% return on investment over 90 days.

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

GEAR4MUSIC LS 10  vs.  SWISS WATER DECAFFCOFFEE

GEAR4MUSIC LS 10

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GEAR4MUSIC LS 10 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GEAR4MUSIC reported solid returns over the last few months and may actually be approaching a breakup point.

SWISS WATER DECAFFCOFFEE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SWISS WATER DECAFFCOFFEE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SWISS WATER reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GEAR4MUSIC and SWISS WATER

The main advantage of trading using opposite GEAR4MUSIC and SWISS WATER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GEAR4MUSIC position performs unexpectedly, SWISS WATER 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 SWISS WATER will offset losses from the drop in SWISS WATER's long position.

The idea behind GEAR4MUSIC LS 10 and SWISS WATER DECAFFCOFFEE 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.