Correlation Between Swiss Re and Holcim AG

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

Diversification Opportunities for Swiss Re and Holcim AG

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between Swiss and Holcim is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Re AG and Holcim AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holcim 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 Holcim AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holcim AG has no effect on the direction of Swiss Re i.e., Swiss Re and Holcim AG go up and down completely randomly.

Pair Corralation between Swiss Re and Holcim AG

Assuming the 90 days trading horizon Swiss Re AG is expected to generate 1.09 times more return on investment than Holcim AG. However, Swiss Re is 1.09 times more volatile than Holcim AG. It trades about 0.1 of its potential returns per unit of risk. Holcim AG is currently generating about 0.11 per unit of risk. If you would invest  8,347  in Swiss Re AG on September 30, 2024 and sell it today you would earn a total of  4,818  from holding Swiss Re AG or generate 57.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Swiss Re AG  vs.  Holcim AG

 Performance 
       Timeline  
Swiss Re AG 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Swiss Re AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Swiss Re showed solid returns over the last few months and may actually be approaching a breakup point.
Holcim AG 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Holcim AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Holcim AG is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Swiss Re and Holcim AG Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Swiss Re and Holcim AG

The main advantage of trading using opposite Swiss Re and Holcim AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swiss Re position performs unexpectedly, Holcim 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 Holcim AG will offset losses from the drop in Holcim AG's long position.
The idea behind Swiss Re AG and Holcim 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.

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