Correlation Between Swiss Re and Broadwind

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

Diversification Opportunities for Swiss Re and Broadwind

-0.05

Correlation Coefficient

Swiss Re  Broadwind

Good diversification

The 3 months correlation between Swiss and Broadwind is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Re AG and Broadwind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadwind 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 Broadwind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadwind has no effect on the direction of Swiss Re i.e., Swiss Re and Broadwind go up and down completely randomly.

Pair Corralation between Swiss Re and Broadwind

Assuming the 90 days trading horizon Swiss Re AG is expected to generate 0.24 times more return on investment than Broadwind. However, Swiss Re AG is 4.23 times less risky than Broadwind. It trades about 0.21 of its potential returns per unit of risk. Broadwind is currently generating about -0.05 per unit of risk. If you would invest  3,440  in Swiss Re AG on October 25, 2024 and sell it today you would earn a total of  160.00  from holding Swiss Re AG or generate 4.65% return on investment over 90 days.

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

Swiss Re AG  vs.  Broadwind

Swiss Re AG

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Swiss Re AG are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Swiss Re unveiled solid returns over the last few months and may actually be approaching a breakup point.

Broadwind

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Swiss Re and Broadwind

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

The idea behind Swiss Re AG and Broadwind 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.