Correlation Between Holcim AG and Swiss Re

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

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

Diversification Opportunities for Holcim AG and Swiss Re

0.89

Correlation Coefficient

Holcim AG  Swiss Re

Very poor diversification

The 3 months correlation between Holcim and Swiss is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Holcim AG 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 Holcim AG 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 Holcim AG 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 Holcim AG i.e., Holcim AG and Swiss Re go up and down completely randomly.

Pair Corralation between Holcim AG and Swiss Re

Assuming the 90 days trading horizon Holcim AG is expected to generate 1.36 times less return on investment than Swiss Re. In addition to that, Holcim AG is 1.7 times more volatile than Swiss Re AG. It trades about 0.1 of its total potential returns per unit of risk. Swiss Re AG is currently generating about 0.24 per unit of volatility. If you would invest  13,120  in Swiss Re AG on December 30, 2024 and sell it today you would earn a total of  2,035  from holding Swiss Re AG or generate 15.51% return on investment over 90 days.

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

Holcim AG  vs.  Swiss Re AG

Holcim AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Holcim AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Holcim AG may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Swiss Re AG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Swiss Re AG are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Swiss Re showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Holcim AG and Swiss Re

The main advantage of trading using opposite Holcim AG and Swiss Re positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Holcim AG 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 Holcim AG 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.