Correlation Between Swiss Re and MUENCHRUECKUNSADR

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

By analyzing existing cross correlation between Swiss Re AG and MUENCHRUECKUNSADR 110, you can compare the effects of market volatilities on Swiss Re and MUENCHRUECKUNSADR 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 Re with a short position of MUENCHRUECKUNSADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swiss Re and MUENCHRUECKUNSADR.

Diversification Opportunities for Swiss Re and MUENCHRUECKUNSADR

0.54

Correlation Coefficient

Swiss Re  MUENCHRUECKUNSADR

Very weak diversification

The 3 months correlation between Swiss and MUENCHRUECKUNSADR is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Re AG and MUENCHRUECKUNSADR 110 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MUENCHRUECKUNSADR 110 and Swiss Re 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 Re AG are associated (or correlated) with MUENCHRUECKUNSADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MUENCHRUECKUNSADR 110 has no effect on the direction of Swiss Re i.e., Swiss Re and MUENCHRUECKUNSADR go up and down completely randomly.

Pair Corralation between Swiss Re and MUENCHRUECKUNSADR

Assuming the 90 days trading horizon Swiss Re is expected to generate 3.7 times less return on investment than MUENCHRUECKUNSADR. But when comparing it to its historical volatility, Swiss Re AG is 1.33 times less risky than MUENCHRUECKUNSADR. It trades about 0.02 of its potential returns per unit of risk. MUENCHRUECKUNSADR 110 is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  950.00  in MUENCHRUECKUNSADR 110 on September 23, 2024 and sell it today you would earn a total of  30.00  from holding MUENCHRUECKUNSADR 110 or generate 3.16% return on investment over 90 days.

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

Swiss Re AG  vs.  MUENCHRUECKUNSADR 110

Swiss Re AG

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Swiss Re AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Swiss Re reported solid returns over the last few months and may actually be approaching a breakup point.

MUENCHRUECKUNSADR 110

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MUENCHRUECKUNSADR 110 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, MUENCHRUECKUNSADR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Swiss Re and MUENCHRUECKUNSADR

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

The idea behind Swiss Re AG and MUENCHRUECKUNSADR 110 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.