Correlation Between Zurich Insurance and Exelon Corp

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

Diversification Opportunities for Zurich Insurance and Exelon Corp

0.81

Correlation Coefficient

Zurich Insurance  Exelon Corp

Very poor diversification

The 3 months correlation between Zurich and Exelon is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Zurich Insurance Group and Exelon Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exelon Corp 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 Exelon Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exelon Corp has no effect on the direction of Zurich Insurance i.e., Zurich Insurance and Exelon Corp go up and down completely randomly.

Pair Corralation between Zurich Insurance and Exelon Corp

Assuming the 90 days trading horizon Zurich Insurance is expected to generate 1.3 times less return on investment than Exelon Corp. But when comparing it to its historical volatility, Zurich Insurance Group is 1.28 times less risky than Exelon Corp. It trades about 0.24 of its potential returns per unit of risk. Exelon Corp is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  3,718  in Exelon Corp on December 31, 2024 and sell it today you would earn a total of  764.00  from holding Exelon Corp or generate 20.55% return on investment over 90 days.

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

Zurich Insurance Group  vs.  Exelon Corp

Zurich Insurance

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zurich Insurance Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Zurich Insurance unveiled solid returns over the last few months and may actually be approaching a breakup point.

Exelon Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Exelon Corp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Exelon Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zurich Insurance and Exelon Corp

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

The idea behind Zurich Insurance Group and Exelon Corp 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.