Correlation Between SGS SA and Swiss Re

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

By analyzing existing cross correlation between SGS SA and Swiss Re AG, you can compare the effects of market volatilities on SGS SA and Swiss Re 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 SGS SA with a short position of Swiss Re. Check out your portfolio center. Please also check ongoing floating volatility patterns of SGS SA and Swiss Re.

Diversification Opportunities for SGS SA and Swiss Re

0.27

Correlation Coefficient

SGS SA  Swiss Re

Modest diversification

The 3 months correlation between SGS and Swiss is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding SGS SA and Swiss Re AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swiss Re AG and SGS SA 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 SGS SA are associated (or correlated) with Swiss Re. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swiss Re AG has no effect on the direction of SGS SA i.e., SGS SA and Swiss Re go up and down completely randomly.

Pair Corralation between SGS SA and Swiss Re

Assuming the 90 days trading horizon SGS SA is expected to generate 0.95 times more return on investment than Swiss Re. However, SGS SA is 1.05 times less risky than Swiss Re. It trades about 0.04 of its potential returns per unit of risk. Swiss Re AG is currently generating about -0.01 per unit of risk. If you would invest  8,168  in SGS SA on May 1, 2025 and sell it today you would earn a total of  152.00  from holding SGS SA or generate 1.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

SGS SA  vs.  Swiss Re AG

SGS SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SGS SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, SGS SA is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Swiss Re AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Swiss Re AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Swiss Re is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with SGS SA and Swiss Re

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

The idea behind SGS SA and Swiss Re AG 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.