Correlation Between Swiss Life and Lonza Group

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

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

Diversification Opportunities for Swiss Life and Lonza Group

-0.42

Correlation Coefficient

Swiss Life  Lonza Group

Very good diversification

The 3 months correlation between Swiss and Lonza is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Life Holding and Lonza Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lonza Group AG and Swiss Life 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 Life Holding are associated (or correlated) with Lonza Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lonza Group AG has no effect on the direction of Swiss Life i.e., Swiss Life and Lonza Group go up and down completely randomly.

Pair Corralation between Swiss Life and Lonza Group

Assuming the 90 days trading horizon Swiss Life is expected to generate 28.17 times less return on investment than Lonza Group. But when comparing it to its historical volatility, Swiss Life Holding is 1.54 times less risky than Lonza Group. It trades about 0.01 of its potential returns per unit of risk. Lonza Group AG is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  46,184  in Lonza Group AG on February 23, 2024 and sell it today you would earn a total of  4,876  from holding Lonza Group AG or generate 10.56% return on investment over 90 days.

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

Swiss Life Holding  vs.  Lonza Group AG

Swiss Life Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Swiss Life Holding has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Lonza Group AG

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lonza Group AG are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lonza Group may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Swiss Life and Lonza Group

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

The idea behind Swiss Life Holding and Lonza Group AG 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 Transaction History module to view history of all your transactions and understand their impact on performance.