Correlation Between Münchener Rückversicherung and BNRE Old
Can any of the company-specific risk be diversified away by investing in both Münchener Rückversicherung and BNRE Old 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 BNRE Old 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 BNRE Old, you can compare the effects of market volatilities on Münchener Rückversicherung and BNRE Old 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 BNRE Old. Check out your portfolio center. Please also check ongoing floating volatility patterns of Münchener Rückversicherung and BNRE Old.
Diversification Opportunities for Münchener Rückversicherung and BNRE Old
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Münchener and BNRE is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Mnchener Rckversicherungs Gese and BNRE Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BNRE Old 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 BNRE Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BNRE Old has no effect on the direction of Münchener Rückversicherung i.e., Münchener Rückversicherung and BNRE Old go up and down completely randomly.
Pair Corralation between Münchener Rückversicherung and BNRE Old
Assuming the 90 days horizon Münchener Rückversicherung is expected to generate 4.14 times less return on investment than BNRE Old. In addition to that, Münchener Rückversicherung is 1.03 times more volatile than BNRE Old. It trades about 0.06 of its total potential returns per unit of risk. BNRE Old is currently generating about 0.25 per unit of volatility. If you would invest 4,362 in BNRE Old on November 3, 2024 and sell it today you would earn a total of 1,408 from holding BNRE Old or generate 32.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 55.65% |
| Values | Daily Returns |
Mnchener Rckversicherungs Gese vs. BNRE Old
Performance |
| Timeline |
| Münchener Rückversicherung |
| BNRE Old |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Market Crasher
Münchener Rückversicherung and BNRE Old Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Münchener Rückversicherung and BNRE Old
The main advantage of trading using opposite Münchener Rückversicherung and BNRE Old positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Münchener Rückversicherung position performs unexpectedly, BNRE Old 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 BNRE Old will offset losses from the drop in BNRE Old's long position.The idea behind Mnchener Rckversicherungs Gesellschaft Aktiengesellschaft and BNRE Old 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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