Correlation Between Swiss Re and Mnchener Rckversicherungs
Can any of the company-specific risk be diversified away by investing in both Swiss Re and Mnchener Rckversicherungs 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 Re and Mnchener Rckversicherungs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Swiss Re AG and Mnchener Rckversicherungs Gesellschaft Aktiengesellschaft, you can compare the effects of market volatilities on Swiss Re and Mnchener Rckversicherungs 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 Re with a short position of Mnchener Rckversicherungs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swiss Re and Mnchener Rckversicherungs.
Diversification Opportunities for Swiss Re and Mnchener Rckversicherungs
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Swiss and Mnchener is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Re AG and Mnchener Rckversicherungs Gese in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mnchener Rckversicherungs and Swiss Re 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 Re AG are associated (or correlated) with Mnchener Rckversicherungs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mnchener Rckversicherungs has no effect on the direction of Swiss Re i.e., Swiss Re and Mnchener Rckversicherungs go up and down completely randomly.
Pair Corralation between Swiss Re and Mnchener Rckversicherungs
Assuming the 90 days horizon Swiss Re is expected to generate 2.08 times less return on investment than Mnchener Rckversicherungs. In addition to that, Swiss Re is 2.8 times more volatile than Mnchener Rckversicherungs Gesellschaft Aktiengesellschaft. It trades about 0.02 of its total potential returns per unit of risk. Mnchener Rckversicherungs Gesellschaft Aktiengesellschaft is currently generating about 0.1 per unit of volatility. If you would invest 39,954 in Mnchener Rckversicherungs Gesellschaft Aktiengesellschaft on January 26, 2024 and sell it today you would earn a total of 7,476 from holding Mnchener Rckversicherungs Gesellschaft Aktiengesellschaft or generate 18.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Swiss Re AG vs. Mnchener Rckversicherungs Gese
Performance |
| Timeline |
| Swiss Re AG |
| Mnchener Rckversicherungs |
Swiss Re and Mnchener Rckversicherungs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Swiss Re and Mnchener Rckversicherungs
The main advantage of trading using opposite Swiss Re and Mnchener Rckversicherungs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swiss Re position performs unexpectedly, Mnchener Rckversicherungs 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 Mnchener Rckversicherungs will offset losses from the drop in Mnchener Rckversicherungs' long position.The idea behind Swiss Re AG and Mnchener Rckversicherungs Gesellschaft Aktiengesellschaft 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.| Mnchener Rckversicherungs vs. Swiss Re | Mnchener Rckversicherungs vs. SCOR PK | Mnchener Rckversicherungs vs. SiriusPoint | Mnchener Rckversicherungs vs. Maiden Holdings |
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 the Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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