Correlation Between Swatch and Salvatore Ferragamo

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

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

Diversification Opportunities for Swatch and Salvatore Ferragamo

0.28

Correlation Coefficient

Swatch  Salvatore Ferragamo

Modest diversification

The 3 months correlation between Swatch and Salvatore is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding The Swatch Group and Salvatore Ferragamo SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salvatore Ferragamo SpA and Swatch 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 The Swatch Group are associated (or correlated) with Salvatore Ferragamo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salvatore Ferragamo SpA has no effect on the direction of Swatch i.e., Swatch and Salvatore Ferragamo go up and down completely randomly.

Pair Corralation between Swatch and Salvatore Ferragamo

Assuming the 90 days horizon The Swatch Group is expected to generate 0.99 times more return on investment than Salvatore Ferragamo. However, The Swatch Group is 1.01 times less risky than Salvatore Ferragamo. It trades about -0.01 of its potential returns per unit of risk. Salvatore Ferragamo SpA is currently generating about -0.21 per unit of risk. If you would invest  21,540  in The Swatch Group on January 25, 2024 and sell it today you would lose (289.00) from holding The Swatch Group or give up 1.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

The Swatch Group  vs.  Salvatore Ferragamo SpA

Swatch Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Swatch Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Swatch is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Salvatore Ferragamo SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Salvatore Ferragamo SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Swatch and Salvatore Ferragamo

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

The idea behind The Swatch Group and Salvatore Ferragamo SpA 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.