Correlation Between Swiss Re and Greenlight Capital

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

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

Diversification Opportunities for Swiss Re and Greenlight Capital

0.75

Correlation Coefficient

Swiss Re  Greenlight Capital

Poor diversification

The 3 months correlation between Swiss and Greenlight is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Re AG and Greenlight Capital Re in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greenlight Capital and Swiss Re 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 Swiss Re AG are associated (or correlated) with Greenlight Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greenlight Capital has no effect on the direction of Swiss Re i.e., Swiss Re and Greenlight Capital go up and down completely randomly.

Pair Corralation between Swiss Re and Greenlight Capital

Assuming the 90 days horizon Swiss Re AG is expected to generate 1.19 times more return on investment than Greenlight Capital. However, Swiss Re is 1.19 times more volatile than Greenlight Capital Re. It trades about 0.24 of its potential returns per unit of risk. Greenlight Capital Re is currently generating about -0.02 per unit of risk. If you would invest  14,068  in Swiss Re AG on September 19, 2024 and sell it today you would earn a total of  722.00  from holding Swiss Re AG or generate 5.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Swiss Re AG  vs.  Greenlight Capital Re

Swiss Re AG

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Swiss Re AG are ranked lower than 8 (%) 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.

Greenlight Capital

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Greenlight Capital Re are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Greenlight Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Swiss Re and Greenlight Capital

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

The idea behind Swiss Re AG and Greenlight Capital Re 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 Global Correlations module to find global opportunities by holding instruments from different markets.