Correlation Between Swiss Re and SGS SA
Can any of the company-specific risk be diversified away by investing in both Swiss Re and SGS 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 Swiss Re and SGS SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Swiss Re AG and SGS SA, you can compare the effects of market volatilities on Swiss Re and SGS 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 Swiss Re with a short position of SGS SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swiss Re and SGS SA.
Diversification Opportunities for Swiss Re and SGS SA
Excellent diversification
The 3 months correlation between Swiss and SGS is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Re AG and SGS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGS SA and Swiss Re 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 Swiss Re AG are associated (or correlated) with SGS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGS SA has no effect on the direction of Swiss Re i.e., Swiss Re and SGS SA go up and down completely randomly.
Pair Corralation between Swiss Re and SGS SA
Assuming the 90 days trading horizon Swiss Re AG is expected to generate 1.24 times more return on investment than SGS SA. However, Swiss Re is 1.24 times more volatile than SGS SA. It trades about 0.33 of its potential returns per unit of risk. SGS SA is currently generating about -0.27 per unit of risk. If you would invest 11,225 in Swiss Re AG on August 25, 2024 and sell it today you would earn a total of 1,605 from holding Swiss Re AG or generate 14.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Swiss Re AG vs. SGS SA
Performance |
| Timeline |
| Swiss Re AG |
| SGS SA |
Swiss Re and SGS SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Swiss Re and SGS SA
The main advantage of trading using opposite Swiss Re and SGS SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swiss Re position performs unexpectedly, SGS 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 SGS SA will offset losses from the drop in SGS SA's long position.| 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 Stocks Directory module to find actively traded stocks across global markets.
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