Correlation Between Zurich Insurance and Lloyds Banking

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

Diversification Opportunities for Zurich Insurance and Lloyds Banking

-0.58

Correlation Coefficient

Zurich Insurance  Lloyds Banking

Excellent diversification

The 3 months correlation between Zurich and Lloyds is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Zurich Insurance Group and Lloyds Banking Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lloyds Banking Group 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 Lloyds Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lloyds Banking Group has no effect on the direction of Zurich Insurance i.e., Zurich Insurance and Lloyds Banking go up and down completely randomly.

Pair Corralation between Zurich Insurance and Lloyds Banking

Assuming the 90 days trading horizon Zurich Insurance is expected to generate 1.18 times less return on investment than Lloyds Banking. But when comparing it to its historical volatility, Zurich Insurance Group is 1.45 times less risky than Lloyds Banking. It trades about 0.05 of its potential returns per unit of risk. Lloyds Banking Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,469  in Lloyds Banking Group on October 5, 2024 and sell it today you would earn a total of  1,035  from holding Lloyds Banking Group or generate 23.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Zurich Insurance Group  vs.  Lloyds Banking Group

Zurich Insurance

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zurich Insurance Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Zurich Insurance is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Lloyds Banking Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lloyds Banking Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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 Lloyds Banking

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

The idea behind Zurich Insurance Group and Lloyds Banking Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.