Correlation Between Hannover Rck and Swiss Re

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Can any of the company-specific risk be diversified away by investing in both Hannover Rck 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 Hannover Rck and Swiss Re into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hannover Rck SE and Swiss Re AG, you can compare the effects of market volatilities on Hannover Rck 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 Hannover Rck with a short position of Swiss Re. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hannover Rck and Swiss Re.

Diversification Opportunities for Hannover Rck and Swiss Re

0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between Hannover and Swiss is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Hannover Rck SE 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 Hannover Rck 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 Hannover Rck SE 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 Hannover Rck i.e., Hannover Rck and Swiss Re go up and down completely randomly.

Pair Corralation between Hannover Rck and Swiss Re

Assuming the 90 days horizon Hannover Rck SE is expected to generate 1.36 times more return on investment than Swiss Re. However, Hannover Rck is 1.36 times more volatile than Swiss Re AG. It trades about 0.21 of its potential returns per unit of risk. Swiss Re AG is currently generating about 0.25 per unit of risk. If you would invest  25,522  in Hannover Rck SE on September 18, 2024 and sell it today you would earn a total of  1,469  from holding Hannover Rck SE or generate 5.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Hannover Rck SE  vs.  Swiss Re AG

 Performance 
       Timeline  
Hannover Rck SE 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Hannover Rck SE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Hannover Rck reported solid returns over the last few months and may actually be approaching a breakup point.
Swiss Re AG 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Swiss Re AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Swiss Re may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hannover Rck and Swiss Re Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hannover Rck and Swiss Re

The main advantage of trading using opposite Hannover Rck and Swiss Re positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hannover Rck 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 Hannover Rck SE 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.
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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