Correlation Between Zurich Insurance and Indutrade

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

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

Diversification Opportunities for Zurich Insurance and Indutrade

-0.74

Correlation Coefficient

Zurich Insurance  Indutrade

Pay attention - limited upside

The 3 months correlation between Zurich and Indutrade is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Zurich Insurance Group and Indutrade AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indutrade AB and Zurich Insurance 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 Zurich Insurance Group are associated (or correlated) with Indutrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indutrade AB has no effect on the direction of Zurich Insurance i.e., Zurich Insurance and Indutrade go up and down completely randomly.

Pair Corralation between Zurich Insurance and Indutrade

Assuming the 90 days trading horizon Zurich Insurance Group is expected to generate 0.5 times more return on investment than Indutrade. However, Zurich Insurance Group is 2.0 times less risky than Indutrade. It trades about 0.27 of its potential returns per unit of risk. Indutrade AB is currently generating about -0.09 per unit of risk. If you would invest  49,450  in Zurich Insurance Group on September 4, 2024 and sell it today you would earn a total of  6,220  from holding Zurich Insurance Group or generate 12.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Zurich Insurance Group  vs.  Indutrade AB

Zurich Insurance

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zurich Insurance Group are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Zurich Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Indutrade AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indutrade AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Zurich Insurance and Indutrade

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

The idea behind Zurich Insurance Group and Indutrade AB 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.