Correlation Between Münchener Rückversicherung and AXA SA
Can any of the company-specific risk be diversified away by investing in both Münchener Rückversicherung and AXA SA 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 Münchener Rückversicherung and AXA SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mnchener Rckversicherungs Gesellschaft Aktiengesellschaft and AXA SA, you can compare the effects of market volatilities on Münchener Rückversicherung and AXA SA 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 Münchener Rückversicherung with a short position of AXA SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Münchener Rückversicherung and AXA SA.
Diversification Opportunities for Münchener Rückversicherung and AXA SA
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Münchener and AXA is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Mnchener Rckversicherungs Gese and AXA SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXA SA and Münchener Rückversicherung 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 Mnchener Rckversicherungs Gesellschaft Aktiengesellschaft are associated (or correlated) with AXA SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXA SA has no effect on the direction of Münchener Rückversicherung i.e., Münchener Rückversicherung and AXA SA go up and down completely randomly.
Pair Corralation between Münchener Rückversicherung and AXA SA
Assuming the 90 days horizon Mnchener Rckversicherungs Gesellschaft Aktiengesellschaft is expected to generate 1.0 times more return on investment than AXA SA. However, Mnchener Rckversicherungs Gesellschaft Aktiengesellschaft is 1.0 times less risky than AXA SA. It trades about 0.07 of its potential returns per unit of risk. AXA SA is currently generating about 0.04 per unit of risk. If you would invest 40,490 in Mnchener Rckversicherungs Gesellschaft Aktiengesellschaft on September 3, 2024 and sell it today you would earn a total of 12,093 from holding Mnchener Rckversicherungs Gesellschaft Aktiengesellschaft or generate 29.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.56% |
| Values | Daily Returns |
Mnchener Rckversicherungs Gese vs. AXA SA
Performance |
| Timeline |
| Münchener Rückversicherung |
| AXA SA |
Münchener Rückversicherung and AXA SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Münchener Rückversicherung and AXA SA
The main advantage of trading using opposite Münchener Rückversicherung and AXA SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Münchener Rückversicherung position performs unexpectedly, AXA SA 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 AXA SA will offset losses from the drop in AXA SA's long position.The idea behind Mnchener Rckversicherungs Gesellschaft Aktiengesellschaft and AXA SA 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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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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