Correlation Between Swiss Re and Geberit AG

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

Diversification Opportunities for Swiss Re and Geberit AG

-0.15

Correlation Coefficient

Swiss Re  Geberit AG

Good diversification

The 3 months correlation between Swiss and Geberit is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Re AG and Geberit AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geberit AG 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 Geberit AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geberit AG has no effect on the direction of Swiss Re i.e., Swiss Re and Geberit AG go up and down completely randomly.

Pair Corralation between Swiss Re and Geberit AG

Assuming the 90 days trading horizon Swiss Re AG is expected to generate 1.23 times more return on investment than Geberit AG. However, Swiss Re is 1.23 times more volatile than Geberit AG. It trades about 0.12 of its potential returns per unit of risk. Geberit AG is currently generating about -0.02 per unit of risk. If you would invest  11,730  in Swiss Re AG on September 3, 2024 and sell it today you would earn a total of  1,285  from holding Swiss Re AG or generate 10.95% 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.  Geberit AG

Swiss Re AG

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Swiss Re AG are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Swiss Re may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Geberit AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Geberit AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Geberit AG is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Swiss Re and Geberit AG

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

The idea behind Swiss Re AG and Geberit 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.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..