Correlation Between Swiss Re and Molecular Partners

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

Diversification Opportunities for Swiss Re and Molecular Partners

-0.02

Correlation Coefficient

Swiss Re  Molecular Partners

Good diversification

The 3 months correlation between Swiss and Molecular is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Re AG and Molecular Partners AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molecular Partners 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 Molecular Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molecular Partners has no effect on the direction of Swiss Re i.e., Swiss Re and Molecular Partners go up and down completely randomly.

Pair Corralation between Swiss Re and Molecular Partners

Assuming the 90 days trading horizon Swiss Re AG is expected to generate 0.25 times more return on investment than Molecular Partners. However, Swiss Re AG is 4.07 times less risky than Molecular Partners. It trades about 0.21 of its potential returns per unit of risk. Molecular Partners AG is currently generating about 0.05 per unit of risk. If you would invest  11,030  in Swiss Re AG on October 7, 2024 and sell it today you would earn a total of  2,240  from holding Swiss Re AG or generate 20.31% 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.  Molecular Partners AG

Swiss Re AG

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Swiss Re AG are ranked lower than 16 (%) 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.

Molecular Partners

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Molecular Partners AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Molecular Partners showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Swiss Re and Molecular Partners

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

The idea behind Swiss Re AG and Molecular Partners 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.

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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.