Correlation Between ABB and Swiss Life
Can any of the company-specific risk be diversified away by investing in both ABB and Swiss Life 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 ABB and Swiss Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABB and Swiss Life Holding, you can compare the effects of market volatilities on ABB and Swiss Life 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 ABB with a short position of Swiss Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABB and Swiss Life.
Diversification Opportunities for ABB and Swiss Life
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between ABB and Swiss is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding ABB and Swiss Life Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swiss Life Holding and ABB 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 ABB are associated (or correlated) with Swiss Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swiss Life Holding has no effect on the direction of ABB i.e., ABB and Swiss Life go up and down completely randomly.
Pair Corralation between ABB and Swiss Life
Assuming the 90 days trading horizon ABB is expected to generate 1.29 times more return on investment than Swiss Life. However, ABB is 1.29 times more volatile than Swiss Life Holding. It trades about 0.12 of its potential returns per unit of risk. Swiss Life Holding is currently generating about 0.05 per unit of risk. If you would invest 4,916 in ABB on October 26, 2024 and sell it today you would earn a total of 442.00 from holding ABB or generate 8.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ABB vs. Swiss Life Holding
Performance |
| Timeline |
| ABB |
| Swiss Life Holding |
ABB and Swiss Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ABB and Swiss Life
The main advantage of trading using opposite ABB and Swiss Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABB position performs unexpectedly, Swiss Life 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 Life will offset losses from the drop in Swiss Life's long position.The idea behind ABB and Swiss Life Holding 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.| Swiss Life vs. Zurich Insurance Group | Swiss Life vs. Swiss Re AG | Swiss Life vs. Swisscom AG | Swiss Life vs. Lonza Group AG |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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