Correlation Between Galenica Sante and Swiss Life

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

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

Diversification Opportunities for Galenica Sante and Swiss Life

0.4

Correlation Coefficient

Galenica Sante  Swiss Life

Very weak diversification

The 3 months correlation between Galenica and Swiss is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Galenica Sante AG and Swiss Life Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swiss Life Holding and Galenica Sante 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 Galenica Sante AG are associated (or correlated) with Swiss Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swiss Life Holding has no effect on the direction of Galenica Sante i.e., Galenica Sante and Swiss Life go up and down completely randomly.

Pair Corralation between Galenica Sante and Swiss Life

Assuming the 90 days trading horizon Galenica Sante AG is expected to generate 0.87 times more return on investment than Swiss Life. However, Galenica Sante AG is 1.15 times less risky than Swiss Life. It trades about 0.03 of its potential returns per unit of risk. Swiss Life Holding is currently generating about -0.02 per unit of risk. If you would invest  7,425  in Galenica Sante AG on September 14, 2024 and sell it today you would earn a total of  85.00  from holding Galenica Sante AG or generate 1.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Galenica Sante AG  vs.  Swiss Life Holding

Galenica Sante AG

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Galenica Sante AG are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Galenica Sante is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Swiss Life Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Swiss Life Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Swiss Life is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Galenica Sante and Swiss Life

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

The idea behind Galenica Sante AG and Swiss Life Holding 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.