Correlation Between Swiss Life and Nufarm

Can any of the company-specific risk be diversified away by investing in both Swiss Life and Nufarm 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 Nufarm 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 Nufarm Limited, you can compare the effects of market volatilities on Swiss Life and Nufarm 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 Nufarm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swiss Life and Nufarm.

Diversification Opportunities for Swiss Life and Nufarm

0.36

Correlation Coefficient

Swiss Life  Nufarm

Weak diversification

The 3 months correlation between Swiss and Nufarm is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Life Holding and Nufarm Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nufarm Limited 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 Nufarm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nufarm Limited has no effect on the direction of Swiss Life i.e., Swiss Life and Nufarm go up and down completely randomly.

Pair Corralation between Swiss Life and Nufarm

Assuming the 90 days trading horizon Swiss Life Holding is expected to generate 1.28 times more return on investment than Nufarm. However, Swiss Life is 1.28 times more volatile than Nufarm Limited. It trades about 0.01 of its potential returns per unit of risk. Nufarm Limited is currently generating about -0.24 per unit of risk. If you would invest  3,700  in Swiss Life Holding on October 11, 2024 and sell it today you would earn a total of  0.00  from holding Swiss Life Holding or generate 0.0% return on investment over 90 days.

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

Swiss Life Holding  vs.  Nufarm Limited

Swiss Life Holding

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Swiss Life Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Swiss Life is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Nufarm Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nufarm Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Swiss Life and Nufarm

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

The idea behind Swiss Life Holding and Nufarm Limited 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.