Correlation Between Swiss Leader and IShares SMI

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

By analyzing existing cross correlation between Swiss Leader Price and iShares SMI ETF, you can compare the effects of market volatilities on Swiss Leader and IShares SMI 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 Leader with a short position of IShares SMI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swiss Leader and IShares SMI.

Diversification Opportunities for Swiss Leader and IShares SMI

0.71

Correlation Coefficient

Swiss Leader  IShares SMI

Poor diversification

The 3 months correlation between Swiss and IShares is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Leader Price and iShares SMI ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SMI ETF and Swiss Leader 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 Leader Price are associated (or correlated) with IShares SMI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SMI ETF has no effect on the direction of Swiss Leader i.e., Swiss Leader and IShares SMI go up and down completely randomly.

Pair Corralation between Swiss Leader and IShares SMI

Assuming the 90 days trading horizon Swiss Leader Price is expected to generate 1.05 times more return on investment than IShares SMI. However, Swiss Leader is 1.05 times more volatile than iShares SMI ETF. It trades about -0.04 of its potential returns per unit of risk. iShares SMI ETF is currently generating about -0.08 per unit of risk. If you would invest  202,924  in Swiss Leader Price on May 20, 2025 and sell it today you would lose (3,310) from holding Swiss Leader Price or give up 1.63% of portfolio value over 90 days.

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

Swiss Leader Price  vs.  iShares SMI ETF

Pair Trading with Swiss Leader and IShares SMI

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

The idea behind Swiss Leader Price and iShares SMI ETF 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.