Correlation Between Swiss Re and Muenchener Rueckver

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

By analyzing existing cross correlation between Swiss Re and Muenchener Rueckver Ges, you can compare the effects of market volatilities on Swiss Re and Muenchener Rueckver 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 Muenchener Rueckver. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swiss Re and Muenchener Rueckver.

Diversification Opportunities for Swiss Re and Muenchener Rueckver

0.98

Correlation Coefficient

Swiss Re  Muenchener Rueckver

Almost no diversification

The 3 months correlation between Swiss and Muenchener is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Re and Muenchener Rueckver Ges in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Muenchener Rueckver Ges 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 are associated (or correlated) with Muenchener Rueckver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Muenchener Rueckver Ges has no effect on the direction of Swiss Re i.e., Swiss Re and Muenchener Rueckver go up and down completely randomly.

Pair Corralation between Swiss Re and Muenchener Rueckver

Assuming the 90 days horizon Swiss Re is expected to generate 1.37 times less return on investment than Muenchener Rueckver. But when comparing it to its historical volatility, Swiss Re is 1.34 times less risky than Muenchener Rueckver. It trades about 0.25 of its potential returns per unit of risk. Muenchener Rueckver Ges is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  1,010  in Muenchener Rueckver Ges on December 30, 2024 and sell it today you would earn a total of  267.00  from holding Muenchener Rueckver Ges or generate 26.44% return on investment over 90 days.

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

Swiss Re  vs.  Muenchener Rueckver Ges

Swiss Re

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Swiss Re are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Swiss Re showed solid returns over the last few months and may actually be approaching a breakup point.

Muenchener Rueckver Ges

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Muenchener Rueckver Ges are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Muenchener Rueckver showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Swiss Re and Muenchener Rueckver

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

The idea behind Swiss Re and Muenchener Rueckver Ges 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.