Correlation Between Zurich Insurance and Revolution Beauty

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

Diversification Opportunities for Zurich Insurance and Revolution Beauty

-0.2

Correlation Coefficient

Zurich Insurance  Revolution Beauty

Good diversification

The 3 months correlation between Zurich and Revolution is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Zurich Insurance Group and Revolution Beauty Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Revolution Beauty 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 Revolution Beauty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Revolution Beauty has no effect on the direction of Zurich Insurance i.e., Zurich Insurance and Revolution Beauty go up and down completely randomly.

Pair Corralation between Zurich Insurance and Revolution Beauty

Assuming the 90 days trading horizon Zurich Insurance is expected to generate 1.53 times less return on investment than Revolution Beauty. But when comparing it to its historical volatility, Zurich Insurance Group is 7.65 times less risky than Revolution Beauty. It trades about 0.07 of its potential returns per unit of risk. Revolution Beauty Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,575  in Revolution Beauty Group on October 23, 2024 and sell it today you would lose (86.00) from holding Revolution Beauty Group or give up 5.46% of portfolio value over 90 days.

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

Zurich Insurance Group  vs.  Revolution Beauty Group

Zurich Insurance

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zurich Insurance Group are ranked lower than 5 (%) 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Revolution Beauty

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Revolution Beauty Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Revolution Beauty 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 Revolution Beauty

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

The idea behind Zurich Insurance Group and Revolution Beauty 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.

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.