Correlation Between Basilea Pharmaceutica and Swiss Life

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

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

Diversification Opportunities for Basilea Pharmaceutica and Swiss Life

0.72

Correlation Coefficient

Basilea Pharmaceutica  Swiss Life

Poor diversification

The 3 months correlation between Basilea and Swiss is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Basilea Pharmaceutica AG and Swiss Life Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swiss Life Holding and Basilea Pharmaceutica 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 Basilea Pharmaceutica AG are associated (or correlated) with Swiss Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swiss Life Holding has no effect on the direction of Basilea Pharmaceutica i.e., Basilea Pharmaceutica and Swiss Life go up and down completely randomly.

Pair Corralation between Basilea Pharmaceutica and Swiss Life

Assuming the 90 days trading horizon Basilea Pharmaceutica is expected to generate 1.16 times less return on investment than Swiss Life. In addition to that, Basilea Pharmaceutica is 2.0 times more volatile than Swiss Life Holding. It trades about 0.12 of its total potential returns per unit of risk. Swiss Life Holding is currently generating about 0.28 per unit of volatility. If you would invest  69,960  in Swiss Life Holding on December 30, 2024 and sell it today you would earn a total of  10,780  from holding Swiss Life Holding or generate 15.41% return on investment over 90 days.

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

Basilea Pharmaceutica AG  vs.  Swiss Life Holding

Basilea Pharmaceutica

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Basilea Pharmaceutica AG are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Basilea Pharmaceutica may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Swiss Life Holding

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Swiss Life Holding are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Swiss Life showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Basilea Pharmaceutica and Swiss Life

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

The idea behind Basilea Pharmaceutica AG and Swiss Life Holding 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.