Correlation Between Reinsurance Group and Colas SA

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

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

Diversification Opportunities for Reinsurance Group and Colas SA

0.67

Correlation Coefficient

Reinsurance Group  Colas SA

Poor diversification

The 3 months correlation between Reinsurance and Colas is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Reinsurance Group of and Colas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colas SA and Reinsurance Group 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 Reinsurance Group of are associated (or correlated) with Colas SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colas SA has no effect on the direction of Reinsurance Group i.e., Reinsurance Group and Colas SA go up and down completely randomly.

Pair Corralation between Reinsurance Group and Colas SA

If you would invest  37,070  in Colas SA on February 2, 2024 and sell it today you would earn a total of  0.00  from holding Colas SA or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.55%
Values	Daily Returns

Reinsurance Group of  vs.  Colas SA

Reinsurance Group

Risk-Adjusted Performance

16 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Reinsurance Group of are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile technical and fundamental indicators, Reinsurance Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Colas SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Colas SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Colas SA is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Reinsurance Group and Colas SA

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

The idea behind Reinsurance Group of and Colas SA 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.