Correlation Between Zurich Insurance and Sovereign Metals

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

Diversification Opportunities for Zurich Insurance and Sovereign Metals

0.75

Correlation Coefficient

Zurich Insurance  Sovereign Metals

Poor diversification

The 3 months correlation between Zurich and Sovereign is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Zurich Insurance Group and Sovereign Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sovereign Metals 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 Sovereign Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sovereign Metals has no effect on the direction of Zurich Insurance i.e., Zurich Insurance and Sovereign Metals go up and down completely randomly.

Pair Corralation between Zurich Insurance and Sovereign Metals

Assuming the 90 days trading horizon Zurich Insurance Group is expected to generate 0.43 times more return on investment than Sovereign Metals. However, Zurich Insurance Group is 2.32 times less risky than Sovereign Metals. It trades about -0.1 of its potential returns per unit of risk. Sovereign Metals is currently generating about -0.32 per unit of risk. If you would invest  54,210  in Zurich Insurance Group on September 22, 2024 and sell it today you would lose (1,000.00) from holding Zurich Insurance Group or give up 1.84% of portfolio value over 90 days.

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

Zurich Insurance Group  vs.  Sovereign Metals

Zurich Insurance

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zurich Insurance Group are ranked lower than 6 (%) 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.

Sovereign Metals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sovereign Metals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sovereign Metals 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 Sovereign Metals

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

The idea behind Zurich Insurance Group and Sovereign Metals 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.