Correlation Between Swiss Re and ABB

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

Diversification Opportunities for Swiss Re and ABB

-0.08

Correlation Coefficient

Swiss Re  ABB

Good diversification

The 3 months correlation between Swiss and ABB is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Re AG and ABB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB 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 ABB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABB has no effect on the direction of Swiss Re i.e., Swiss Re and ABB go up and down completely randomly.

Pair Corralation between Swiss Re and ABB

Assuming the 90 days trading horizon Swiss Re is expected to generate 34.33 times less return on investment than ABB. But when comparing it to its historical volatility, Swiss Re AG is 1.86 times less risky than ABB. It trades about 0.01 of its potential returns per unit of risk. ABB is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  4,217  in ABB on April 23, 2025 and sell it today you would earn a total of  935.00  from holding ABB or generate 22.17% return on investment over 90 days.

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

Swiss Re AG  vs.  ABB

Swiss Re AG

Risk-Adjusted Performance

Weak

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

ABB

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ABB are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ABB showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Swiss Re and ABB

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

The idea behind Swiss Re AG and ABB 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.