Correlation Between SGS SA and Swiss Re
Can any of the company-specific risk be diversified away by investing in both SGS SA 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 SGS SA and Swiss Re into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SGS SA and Swiss Re AG, you can compare the effects of market volatilities on SGS SA 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 SGS SA with a short position of Swiss Re. Check out your portfolio center. Please also check ongoing floating volatility patterns of SGS SA and Swiss Re.
Diversification Opportunities for SGS SA and Swiss Re
Excellent diversification
The 3 months correlation between SGS and Swiss is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding SGS SA 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 SGS SA 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 SGS SA 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 SGS SA i.e., SGS SA and Swiss Re go up and down completely randomly.
Pair Corralation between SGS SA and Swiss Re
Assuming the 90 days trading horizon SGS SA is expected to generate 1.52 times less return on investment than Swiss Re. In addition to that, SGS SA is 1.06 times more volatile than Swiss Re AG. It trades about 0.06 of its total potential returns per unit of risk. Swiss Re AG is currently generating about 0.1 per unit of volatility. If you would invest 9,250 in Swiss Re AG on August 25, 2024 and sell it today you would earn a total of 3,580 from holding Swiss Re AG or generate 38.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SGS SA vs. Swiss Re AG
Performance |
| Timeline |
| SGS SA |
| Swiss Re AG |
SGS SA and Swiss Re Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SGS SA and Swiss Re
The main advantage of trading using opposite SGS SA and Swiss Re positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SGS SA 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 SGS SA 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.| Swiss Re vs. Zurich Insurance Group | Swiss Re vs. Swiss Life Holding | Swiss Re vs. Novartis AG | Swiss Re vs. UBS 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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