Correlation Between Albireo Pharma and Swatch Group

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Can any of the company-specific risk be diversified away by investing in both Albireo Pharma and Swatch 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 Albireo Pharma and Swatch Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Albireo Pharma and Swatch Group AG, you can compare the effects of market volatilities on Albireo Pharma and Swatch 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 Albireo Pharma with a short position of Swatch Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Albireo Pharma and Swatch Group.

Diversification Opportunities for Albireo Pharma and Swatch Group

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Albireo and Swatch is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Albireo Pharma and Swatch Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swatch Group AG and Albireo Pharma 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 Albireo Pharma are associated (or correlated) with Swatch Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swatch Group AG has no effect on the direction of Albireo Pharma i.e., Albireo Pharma and Swatch Group go up and down completely randomly.

Pair Corralation between Albireo Pharma and Swatch Group

Given the investment horizon of 90 days Albireo Pharma is expected to generate 9.02 times more return on investment than Swatch Group. However, Albireo Pharma is 9.02 times more volatile than Swatch Group AG. It trades about 0.17 of its potential returns per unit of risk. Swatch Group AG is currently generating about 0.37 per unit of risk. If you would invest  2,136  in Albireo Pharma on November 9, 2022 and sell it today you would earn a total of  2,314  from holding Albireo Pharma or generate 108.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy97.5%
ValuesDaily Returns

Albireo Pharma  vs.  Swatch Group AG

 Performance (%) 
       Timeline  
Albireo Pharma 
Albireo Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Albireo Pharma are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental drivers, Albireo Pharma displayed solid returns over the last few months and may actually be approaching a breakup point.

Albireo Price Channel

Swatch Group AG 
Swatch Performance
24 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Swatch Group AG are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Swatch Group showed solid returns over the last few months and may actually be approaching a breakup point.

Swatch Price Channel

Albireo Pharma and Swatch Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Albireo Pharma and Swatch Group

The main advantage of trading using opposite Albireo Pharma and Swatch Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Albireo Pharma position performs unexpectedly, Swatch 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 Swatch Group will offset losses from the drop in Swatch Group's long position.
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The idea behind Albireo Pharma and Swatch Group 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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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 Commodity Channel Index module to use Commodity Channel Index to analyze current equity momentum.

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