Correlation Between Greenlight Capital and Muenchener Rueckver

Can any of the company-specific risk be diversified away by investing in both Greenlight Capital and Muenchener Rueckver 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 Greenlight Capital and Muenchener Rueckver into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Greenlight Capital Re and Muenchener Rueckver Ges, you can compare the effects of market volatilities on Greenlight Capital and Muenchener Rueckver 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 Greenlight Capital with a short position of Muenchener Rueckver. Check out your portfolio center. Please also check ongoing floating volatility patterns of Greenlight Capital and Muenchener Rueckver.

Diversification Opportunities for Greenlight Capital and Muenchener Rueckver

-0.48

Correlation Coefficient

Greenlight Capital  Muenchener Rueckver

Very good diversification

The 3 months correlation between Greenlight and Muenchener is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Greenlight Capital Re and Muenchener Rueckver Ges in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Muenchener Rueckver Ges and Greenlight Capital 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 Greenlight Capital Re are associated (or correlated) with Muenchener Rueckver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Muenchener Rueckver Ges has no effect on the direction of Greenlight Capital i.e., Greenlight Capital and Muenchener Rueckver go up and down completely randomly.

Pair Corralation between Greenlight Capital and Muenchener Rueckver

Given the investment horizon of 90 days Greenlight Capital Re is expected to generate 1.33 times more return on investment than Muenchener Rueckver. However, Greenlight Capital is 1.33 times more volatile than Muenchener Rueckver Ges. It trades about 0.09 of its potential returns per unit of risk. Muenchener Rueckver Ges is currently generating about -0.05 per unit of risk. If you would invest  1,372  in Greenlight Capital Re on September 4, 2024 and sell it today you would earn a total of  127.00  from holding Greenlight Capital Re or generate 9.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Greenlight Capital Re  vs.  Muenchener Rueckver Ges

Greenlight Capital

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Greenlight Capital Re are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Greenlight Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Muenchener Rueckver Ges

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Muenchener Rueckver Ges has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Muenchener Rueckver is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Greenlight Capital and Muenchener Rueckver

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

The idea behind Greenlight Capital Re and Muenchener Rueckver Ges 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 Transaction History module to view history of all your transactions and understand their impact on performance.