Correlation Between Morningstar Unconstrained and Swatch Group

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

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

Diversification Opportunities for Morningstar Unconstrained and Swatch Group

-0.34

Correlation Coefficient

Morningstar Unconstrained  Swatch Group

Very good diversification

The 3 months correlation between Morningstar and Swatch is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar Unconstrained Allo 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 Morningstar Unconstrained 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 Morningstar Unconstrained Allocation 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 Morningstar Unconstrained i.e., Morningstar Unconstrained and Swatch Group go up and down completely randomly.

Pair Corralation between Morningstar Unconstrained and Swatch Group

Assuming the 90 days horizon Morningstar Unconstrained Allocation is expected to generate 0.38 times more return on investment than Swatch Group. However, Morningstar Unconstrained Allocation is 2.63 times less risky than Swatch Group. It trades about -0.28 of its potential returns per unit of risk. Swatch Group AG is currently generating about -0.16 per unit of risk. If you would invest  1,084  in Morningstar Unconstrained Allocation on January 20, 2024 and sell it today you would lose (41.00) from holding Morningstar Unconstrained Allocation or give up 3.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Morningstar Unconstrained Allo  vs.  Swatch Group AG

Morningstar Unconstrained

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Morningstar Unconstrained Allocation are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Morningstar Unconstrained is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Swatch Group AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Swatch Group AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Morningstar Unconstrained and Swatch Group

The main advantage of trading using opposite Morningstar Unconstrained and Swatch Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morningstar Unconstrained 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.

The idea behind Morningstar Unconstrained Allocation 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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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.