Correlation Between Swiss Re and Nedbank
Can any of the company-specific risk be diversified away by investing in both Swiss Re and Nedbank 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 Nedbank 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 Nedbank Group, you can compare the effects of market volatilities on Swiss Re and Nedbank 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 Nedbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swiss Re and Nedbank.
Diversification Opportunities for Swiss Re and Nedbank
Very weak diversification
The 3 months correlation between Swiss and Nedbank is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Re AG and Nedbank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nedbank Group 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 Nedbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nedbank Group has no effect on the direction of Swiss Re i.e., Swiss Re and Nedbank go up and down completely randomly.
Pair Corralation between Swiss Re and Nedbank
Assuming the 90 days horizon Swiss Re AG is expected to generate 2.66 times more return on investment than Nedbank. However, Swiss Re is 2.66 times more volatile than Nedbank Group. It trades about 0.04 of its potential returns per unit of risk. Nedbank Group is currently generating about 0.01 per unit of risk. If you would invest 8,015 in Swiss Re AG on January 21, 2024 and sell it today you would earn a total of 2,724 from holding Swiss Re AG or generate 33.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Swiss Re AG vs. Nedbank Group
Performance |
| Timeline |
| Swiss Re AG |
| Nedbank Group |
Swiss Re and Nedbank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Swiss Re and Nedbank
The main advantage of trading using opposite Swiss Re and Nedbank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swiss Re position performs unexpectedly, Nedbank 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 Nedbank will offset losses from the drop in Nedbank's long position.The idea behind Swiss Re AG and Nedbank Group 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.| Nedbank vs. Standard Bank Group | Nedbank vs. Sanlam Ltd PK | Nedbank vs. Absa Group Ltd | Nedbank vs. Bank Mandiri Persero |
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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.
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