Correlation Between Hannover Rck and Muenchener Rueckver

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

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

Diversification Opportunities for Hannover Rck and Muenchener Rueckver

-0.4

Correlation Coefficient

Hannover Rck  Muenchener Rueckver

Very good diversification

The 3 months correlation between Hannover and Muenchener is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hannover Rck 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 Hannover Rck 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 Hannover Rck 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 Hannover Rck i.e., Hannover Rck and Muenchener Rueckver go up and down completely randomly.

Pair Corralation between Hannover Rck and Muenchener Rueckver

Assuming the 90 days horizon Hannover Rck SE is expected to generate 1.26 times more return on investment than Muenchener Rueckver. However, Hannover Rck is 1.26 times more volatile than Muenchener Rueckver Ges. It trades about 0.13 of its potential returns per unit of risk. Muenchener Rueckver Ges is currently generating about -0.01 per unit of risk. If you would invest  22,770  in Hannover Rck SE on September 20, 2024 and sell it today you would earn a total of  3,535  from holding Hannover Rck SE or generate 15.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Hannover Rck SE  vs.  Muenchener Rueckver Ges

Hannover Rck SE

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hannover Rck SE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Hannover Rck reported solid returns over the last few months and may actually be approaching a breakup point.

Muenchener Rueckver Ges

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Muenchener Rueckver Ges has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Muenchener Rueckver is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hannover Rck and Muenchener Rueckver

The main advantage of trading using opposite Hannover Rck and Muenchener Rueckver positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hannover Rck 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 Hannover Rck 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.

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 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.