Correlation Between Japan Steel and Swiss Re

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

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

Diversification Opportunities for Japan Steel and Swiss Re

0.69

Correlation Coefficient

Japan Steel  Swiss Re

Poor diversification

The 3 months correlation between Japan and Swiss is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding The Japan Steel 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 Japan Steel 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 The Japan Steel 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 Japan Steel i.e., Japan Steel and Swiss Re go up and down completely randomly.

Pair Corralation between Japan Steel and Swiss Re

Assuming the 90 days horizon The Japan Steel is expected to generate 1.64 times more return on investment than Swiss Re. However, Japan Steel is 1.64 times more volatile than Swiss Re AG. It trades about 0.06 of its potential returns per unit of risk. Swiss Re AG is currently generating about 0.08 per unit of risk. If you would invest  1,860  in The Japan Steel on October 24, 2024 and sell it today you would earn a total of  1,780  from holding The Japan Steel or generate 95.7% return on investment over 90 days.

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

The Japan Steel  vs.  Swiss Re AG

Japan Steel

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Japan Steel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Japan Steel may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Swiss Re AG

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Swiss Re AG are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Swiss Re reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Japan Steel and Swiss Re

The main advantage of trading using opposite Japan Steel and Swiss Re positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Steel 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 The Japan Steel 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 Commodity Directory module to find actively traded commodities issued by global exchanges.