Correlation Between Muenchener Rueckver and Swiss Re

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

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

Diversification Opportunities for Muenchener Rueckver and Swiss Re

-0.08

Correlation Coefficient

Muenchener Rueckver  Swiss Re

Good diversification

The 3 months correlation between Muenchener and Swiss is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Muenchener Rueckver Ges 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 Muenchener Rueckver 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 Muenchener Rueckver Ges 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 Muenchener Rueckver i.e., Muenchener Rueckver and Swiss Re go up and down completely randomly.

Pair Corralation between Muenchener Rueckver and Swiss Re

Assuming the 90 days horizon Muenchener Rueckver is expected to generate 3.53 times less return on investment than Swiss Re. But when comparing it to its historical volatility, Muenchener Rueckver Ges is 1.57 times less risky than Swiss Re. It trades about 0.16 of its potential returns per unit of risk. Swiss Re AG is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  12,743  in Swiss Re AG on September 5, 2024 and sell it today you would earn a total of  1,827  from holding Swiss Re AG or generate 14.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Muenchener Rueckver Ges  vs.  Swiss Re AG

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.

Swiss Re AG

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Swiss Re AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Swiss Re is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Muenchener Rueckver and Swiss Re

The main advantage of trading using opposite Muenchener Rueckver and Swiss Re positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Muenchener Rueckver 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 Muenchener Rueckver Ges 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..