Correlation Between SGS SA and Swiss Life

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

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

Diversification Opportunities for SGS SA and Swiss Life

-0.55

Correlation Coefficient

SGS SA  Swiss Life

Excellent diversification

The 3 months correlation between SGS and Swiss is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding SGS SA 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 SGS SA 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 SGS SA 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 SGS SA i.e., SGS SA and Swiss Life go up and down completely randomly.

Pair Corralation between SGS SA and Swiss Life

Assuming the 90 days trading horizon SGS SA is expected to under-perform the Swiss Life. In addition to that, SGS SA is 1.58 times more volatile than Swiss Life Holding. It trades about -0.09 of its total potential returns per unit of risk. Swiss Life Holding is currently generating about 0.1 per unit of volatility. If you would invest  68,780  in Swiss Life Holding on August 31, 2024 and sell it today you would earn a total of  3,380  from holding Swiss Life Holding or generate 4.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

SGS SA  vs.  Swiss Life Holding

SGS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SGS SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Swiss Life Holding

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Swiss Life Holding are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. 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 SGS SA and Swiss Life

The main advantage of trading using opposite SGS SA and Swiss Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SGS SA 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 SGS SA 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.