Correlation Between SWISS WATER and OSRAM LICHT

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

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

Diversification Opportunities for SWISS WATER and OSRAM LICHT

0.64

Correlation Coefficient

SWISS WATER  OSRAM LICHT

Poor diversification

The 3 months correlation between SWISS and OSRAM is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding SWISS WATER DECAFFCOFFEE and OSRAM LICHT N in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OSRAM LICHT N and SWISS WATER 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 SWISS WATER DECAFFCOFFEE are associated (or correlated) with OSRAM LICHT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OSRAM LICHT N has no effect on the direction of SWISS WATER i.e., SWISS WATER and OSRAM LICHT go up and down completely randomly.

Pair Corralation between SWISS WATER and OSRAM LICHT

Assuming the 90 days horizon SWISS WATER DECAFFCOFFEE is expected to generate 13.02 times more return on investment than OSRAM LICHT. However, SWISS WATER is 13.02 times more volatile than OSRAM LICHT N. It trades about 0.16 of its potential returns per unit of risk. OSRAM LICHT N is currently generating about 0.07 per unit of risk. If you would invest  194.00  in SWISS WATER DECAFFCOFFEE on May 10, 2025 and sell it today you would earn a total of  76.00  from holding SWISS WATER DECAFFCOFFEE or generate 39.18% return on investment over 90 days.

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

SWISS WATER DECAFFCOFFEE  vs.  OSRAM LICHT N

SWISS WATER DECAFFCOFFEE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SWISS WATER DECAFFCOFFEE are ranked lower than 12 (%) 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.

OSRAM LICHT N

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in OSRAM LICHT N are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, OSRAM LICHT is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SWISS WATER and OSRAM LICHT

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

The idea behind SWISS WATER DECAFFCOFFEE and OSRAM LICHT N 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.