Correlation Between Swiss Re and Hannover Rck

Can any of the company-specific risk be diversified away by investing in both Swiss Re and Hannover Rck 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 Hannover Rck 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 Hannover Rck SE, you can compare the effects of market volatilities on Swiss Re and Hannover Rck 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 Hannover Rck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swiss Re and Hannover Rck.

Diversification Opportunities for Swiss Re and Hannover Rck

0.66

Correlation Coefficient

Swiss Re  Hannover Rck

Poor diversification

The 3 months correlation between Swiss and Hannover is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Re AG and Hannover Rck SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannover Rck SE 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 Hannover Rck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hannover Rck SE has no effect on the direction of Swiss Re i.e., Swiss Re and Hannover Rck go up and down completely randomly.

Pair Corralation between Swiss Re and Hannover Rck

Assuming the 90 days horizon Swiss Re AG is expected to generate 2.11 times more return on investment than Hannover Rck. However, Swiss Re is 2.11 times more volatile than Hannover Rck SE. It trades about 0.05 of its potential returns per unit of risk. Hannover Rck SE is currently generating about 0.07 per unit of risk. If you would invest  9,364  in Swiss Re AG on September 19, 2024 and sell it today you would earn a total of  5,106  from holding Swiss Re AG or generate 54.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	79.07%
Values	Daily Returns

Swiss Re AG  vs.  Hannover Rck SE

Swiss Re AG

Risk-Adjusted Performance

6 of 100

OK

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.

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.

Pair Trading with Swiss Re and Hannover Rck

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

The idea behind Swiss Re AG and Hannover Rck SE 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.