Correlation Between Swiss Life and BB Seguridade

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

By analyzing existing cross correlation between Swiss Life Holding and BB Seguridade Participacoes, you can compare the effects of market volatilities on Swiss Life and BB Seguridade 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 Life with a short position of BB Seguridade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swiss Life and BB Seguridade.

Diversification Opportunities for Swiss Life and BB Seguridade

0.41

Correlation Coefficient

Swiss Life  BB Seguridade

Very weak diversification

The 3 months correlation between Swiss and BBSEY is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Life Holding and BB Seguridade Participacoes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BB Seguridade Partic and Swiss Life 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 Life Holding are associated (or correlated) with BB Seguridade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BB Seguridade Partic has no effect on the direction of Swiss Life i.e., Swiss Life and BB Seguridade go up and down completely randomly.

Pair Corralation between Swiss Life and BB Seguridade

Assuming the 90 days horizon Swiss Life Holding is expected to generate 0.83 times more return on investment than BB Seguridade. However, Swiss Life Holding is 1.21 times less risky than BB Seguridade. It trades about 0.08 of its potential returns per unit of risk. BB Seguridade Participacoes is currently generating about 0.01 per unit of risk. If you would invest  3,060  in Swiss Life Holding on September 15, 2024 and sell it today you would earn a total of  870.00  from holding Swiss Life Holding or generate 28.43% return on investment over 90 days.

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

Swiss Life Holding  vs.  BB Seguridade Participacoes

Swiss Life Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Swiss Life Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Swiss Life is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BB Seguridade Partic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BB Seguridade Participacoes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Swiss Life and BB Seguridade

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

The idea behind Swiss Life Holding and BB Seguridade Participacoes 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.