Correlation Between Sika AG and Swiss Re

Can any of the company-specific risk be diversified away by investing in both Sika 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 Sika 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 Sika AG and Swiss Re AG, you can compare the effects of market volatilities on Sika 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 Sika AG with a short position of Swiss Re. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sika AG and Swiss Re.

Diversification Opportunities for Sika AG and Swiss Re

-0.74

Correlation Coefficient

Sika AG  Swiss Re

Pay attention - limited upside

The 3 months correlation between Sika and Swiss is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Sika 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 Sika 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 Sika 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 Sika AG i.e., Sika AG and Swiss Re go up and down completely randomly.

Pair Corralation between Sika AG and Swiss Re

Assuming the 90 days trading horizon Sika AG is expected to under-perform the Swiss Re. But the stock apears to be less risky and, when comparing its historical volatility, Sika AG is 1.32 times less risky than Swiss Re. The stock trades about -0.53 of its potential returns per unit of risk. The Swiss Re AG is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  13,245  in Swiss Re AG on October 5, 2024 and sell it today you would earn a total of  25.00  from holding Swiss Re AG or generate 0.19% return on investment over 90 days.

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

Sika AG  vs.  Swiss Re AG

Sika AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sika AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Swiss Re AG

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Swiss Re AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, Swiss Re showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sika AG and Swiss Re

The main advantage of trading using opposite Sika AG and Swiss Re positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sika 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 Sika 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.