Correlation Between Brookfield Reinsurance and Swiss Re

Can any of the company-specific risk be diversified away by investing in both Brookfield Reinsurance 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 Brookfield Reinsurance and Swiss Re into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Brookfield Reinsurance and Swiss Re AG, you can compare the effects of market volatilities on Brookfield Reinsurance 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 Brookfield Reinsurance with a short position of Swiss Re. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Reinsurance and Swiss Re.

Diversification Opportunities for Brookfield Reinsurance and Swiss Re

0.54

Correlation Coefficient

Brookfield Reinsurance  Swiss Re

Very weak diversification

The 3 months correlation between Brookfield and Swiss is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Reinsurance 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 Brookfield Reinsurance 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 Brookfield Reinsurance 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 Brookfield Reinsurance i.e., Brookfield Reinsurance and Swiss Re go up and down completely randomly.

Pair Corralation between Brookfield Reinsurance and Swiss Re

Given the investment horizon of 90 days Brookfield Reinsurance is expected to generate 0.94 times more return on investment than Swiss Re. However, Brookfield Reinsurance is 1.07 times less risky than Swiss Re. It trades about 0.2 of its potential returns per unit of risk. Swiss Re AG is currently generating about 0.08 per unit of risk. If you would invest  5,233  in Brookfield Reinsurance on September 20, 2024 and sell it today you would earn a total of  537.00  from holding Brookfield Reinsurance or generate 10.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	57.14%
Values	Daily Returns

Brookfield Reinsurance  vs.  Swiss Re AG

Brookfield Reinsurance

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Brookfield Reinsurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather unsteady basic indicators, Brookfield Reinsurance exhibited solid returns over the last few months and may actually be approaching a breakup point.

Swiss Re AG

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Swiss Re AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Swiss Re may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Brookfield Reinsurance and Swiss Re

The main advantage of trading using opposite Brookfield Reinsurance and Swiss Re positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Reinsurance 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 Brookfield Reinsurance 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.