Correlation Between Allianz SE and Muenchener Rueckver

Can any of the company-specific risk be diversified away by investing in both Allianz SE and Muenchener Rueckver 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 Allianz SE and Muenchener Rueckver into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Allianz SE and Muenchener Rueckver Ges, you can compare the effects of market volatilities on Allianz SE and Muenchener Rueckver 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 Allianz SE with a short position of Muenchener Rueckver. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allianz SE and Muenchener Rueckver.

Diversification Opportunities for Allianz SE and Muenchener Rueckver

0.8

Correlation Coefficient

Allianz SE  Muenchener Rueckver

Very poor diversification

The 3 months correlation between Allianz and Muenchener is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Allianz SE and Muenchener Rueckver Ges in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Muenchener Rueckver Ges and Allianz SE 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 Allianz SE are associated (or correlated) with Muenchener Rueckver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Muenchener Rueckver Ges has no effect on the direction of Allianz SE i.e., Allianz SE and Muenchener Rueckver go up and down completely randomly.

Pair Corralation between Allianz SE and Muenchener Rueckver

Assuming the 90 days horizon Allianz SE is expected to generate 1.07 times less return on investment than Muenchener Rueckver. In addition to that, Allianz SE is 1.59 times more volatile than Muenchener Rueckver Ges. It trades about 0.06 of its total potential returns per unit of risk. Muenchener Rueckver Ges is currently generating about 0.1 per unit of volatility. If you would invest  711.00  in Muenchener Rueckver Ges on September 19, 2024 and sell it today you would earn a total of  381.00  from holding Muenchener Rueckver Ges or generate 53.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.91%
Values	Daily Returns

Allianz SE  vs.  Muenchener Rueckver Ges

Allianz SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allianz SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Allianz SE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Muenchener Rueckver Ges

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Muenchener Rueckver Ges are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Muenchener Rueckver is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Allianz SE and Muenchener Rueckver

The main advantage of trading using opposite Allianz SE and Muenchener Rueckver positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allianz SE position performs unexpectedly, Muenchener Rueckver 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 Muenchener Rueckver will offset losses from the drop in Muenchener Rueckver's long position.

The idea behind Allianz SE and Muenchener Rueckver Ges 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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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.