Correlation Between Swiss Life and Mikron Holding

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

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

Diversification Opportunities for Swiss Life and Mikron Holding

0.43

Correlation Coefficient

Swiss Life  Mikron Holding

Very weak diversification

The 3 months correlation between Swiss and Mikron is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Life Holding and Mikron Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mikron Holding AG and Swiss Life 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 Swiss Life Holding are associated (or correlated) with Mikron Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mikron Holding AG has no effect on the direction of Swiss Life i.e., Swiss Life and Mikron Holding go up and down completely randomly.

Pair Corralation between Swiss Life and Mikron Holding

Assuming the 90 days trading horizon Swiss Life Holding is expected to generate 0.27 times more return on investment than Mikron Holding. However, Swiss Life Holding is 3.71 times less risky than Mikron Holding. It trades about 0.39 of its potential returns per unit of risk. Mikron Holding AG is currently generating about -0.1 per unit of risk. If you would invest  74,140  in Swiss Life Holding on December 4, 2024 and sell it today you would earn a total of  4,600  from holding Swiss Life Holding or generate 6.2% return on investment over 90 days.

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

Swiss Life Holding  vs.  Mikron Holding AG

Swiss Life Holding

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Swiss Life Holding are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Swiss Life showed solid returns over the last few months and may actually be approaching a breakup point.

Mikron Holding AG

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mikron Holding AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Mikron Holding may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Swiss Life and Mikron Holding

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

The idea behind Swiss Life Holding and Mikron Holding 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.