Correlation Between Zurich Insurance and United Parcel

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

Diversification Opportunities for Zurich Insurance and United Parcel

-0.25

Correlation Coefficient

Zurich Insurance  United Parcel

Very good diversification

The 3 months correlation between Zurich and United is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Zurich Insurance Group and United Parcel Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parcel Service 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 United Parcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parcel Service has no effect on the direction of Zurich Insurance i.e., Zurich Insurance and United Parcel go up and down completely randomly.

Pair Corralation between Zurich Insurance and United Parcel

Assuming the 90 days trading horizon Zurich Insurance Group is expected to generate 0.55 times more return on investment than United Parcel. However, Zurich Insurance Group is 1.8 times less risky than United Parcel. It trades about 0.14 of its potential returns per unit of risk. United Parcel Service is currently generating about -0.05 per unit of risk. If you would invest  50,834  in Zurich Insurance Group on October 7, 2024 and sell it today you would earn a total of  3,376  from holding Zurich Insurance Group or generate 6.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Zurich Insurance Group  vs.  United Parcel Service

Zurich Insurance

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zurich Insurance Group are ranked lower than 10 (%) 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 February 2025.

United Parcel Service

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Parcel Service has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, United Parcel is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Zurich Insurance and United Parcel

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

The idea behind Zurich Insurance Group and United Parcel Service 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.