Correlation Between UBS Group and Swiss Re

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

By analyzing existing cross correlation between UBS Group AG and Swiss Re AG, you can compare the effects of market volatilities on UBS Group and Swiss Re 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 UBS Group with a short position of Swiss Re. Check out your portfolio center. Please also check ongoing floating volatility patterns of UBS Group and Swiss Re.

Diversification Opportunities for UBS Group and Swiss Re

0.34

Correlation Coefficient

UBS Group  Swiss Re

Weak diversification

The 3 months correlation between UBS and Swiss is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding UBS Group AG and Swiss Re AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swiss Re AG and UBS Group 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 UBS Group AG are associated (or correlated) with Swiss Re. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swiss Re AG has no effect on the direction of UBS Group i.e., UBS Group and Swiss Re go up and down completely randomly.

Pair Corralation between UBS Group and Swiss Re

Assuming the 90 days trading horizon UBS Group is expected to generate 1.38 times less return on investment than Swiss Re. But when comparing it to its historical volatility, UBS Group AG is 1.01 times less risky than Swiss Re. It trades about 0.09 of its potential returns per unit of risk. Swiss Re AG is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  11,605  in Swiss Re AG on August 31, 2024 and sell it today you would earn a total of  1,400  from holding Swiss Re AG or generate 12.06% return on investment over 90 days.

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

UBS Group AG  vs.  Swiss Re AG

UBS Group AG

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UBS Group AG are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, UBS Group may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Swiss Re AG

Risk-Adjusted Performance

10 of 100

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 weak basic indicators, Swiss Re may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with UBS Group and Swiss Re

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

The idea behind UBS Group AG and Swiss Re 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.