Correlation Between Reinsurance Group and Gelsenwasser

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

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

Diversification Opportunities for Reinsurance Group and Gelsenwasser

0.11

Correlation Coefficient

Reinsurance Group  Gelsenwasser

Average diversification

The 3 months correlation between Reinsurance and Gelsenwasser is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Reinsurance Group of and Gelsenwasser AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gelsenwasser AG and Reinsurance Group 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 Reinsurance Group of are associated (or correlated) with Gelsenwasser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gelsenwasser AG has no effect on the direction of Reinsurance Group i.e., Reinsurance Group and Gelsenwasser go up and down completely randomly.

Pair Corralation between Reinsurance Group and Gelsenwasser

Assuming the 90 days trading horizon Reinsurance Group of is expected to generate 0.59 times more return on investment than Gelsenwasser. However, Reinsurance Group of is 1.68 times less risky than Gelsenwasser. It trades about 0.07 of its potential returns per unit of risk. Gelsenwasser AG is currently generating about -0.03 per unit of risk. If you would invest  12,448  in Reinsurance Group of on October 10, 2024 and sell it today you would earn a total of  8,752  from holding Reinsurance Group of or generate 70.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Reinsurance Group of  vs.  Gelsenwasser AG

Reinsurance Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Reinsurance Group of are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Reinsurance Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Gelsenwasser AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gelsenwasser AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Gelsenwasser is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Reinsurance Group and Gelsenwasser

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

The idea behind Reinsurance Group of and Gelsenwasser 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.