Correlation Between Northland Power and Zurich Insurance

Can any of the company-specific risk be diversified away by investing in both Northland Power and Zurich Insurance 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 Northland Power and Zurich Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Northland Power and Zurich Insurance Group, you can compare the effects of market volatilities on Northland Power and Zurich Insurance 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 Northland Power with a short position of Zurich Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northland Power and Zurich Insurance.

Diversification Opportunities for Northland Power and Zurich Insurance

-0.56

Correlation Coefficient

Northland Power  Zurich Insurance

Excellent diversification

The 3 months correlation between Northland and Zurich is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Northland Power and Zurich Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zurich Insurance and Northland Power 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 Northland Power are associated (or correlated) with Zurich Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zurich Insurance has no effect on the direction of Northland Power i.e., Northland Power and Zurich Insurance go up and down completely randomly.

Pair Corralation between Northland Power and Zurich Insurance

Assuming the 90 days horizon Northland Power is expected to under-perform the Zurich Insurance. In addition to that, Northland Power is 1.73 times more volatile than Zurich Insurance Group. It trades about -0.03 of its total potential returns per unit of risk. Zurich Insurance Group is currently generating about 0.05 per unit of volatility. If you would invest  1,968  in Zurich Insurance Group on October 4, 2024 and sell it today you would earn a total of  832.00  from holding Zurich Insurance Group or generate 42.28% return on investment over 90 days.

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

Northland Power  vs.  Zurich Insurance Group

Northland Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northland Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Zurich Insurance

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zurich Insurance Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Zurich Insurance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Northland Power and Zurich Insurance

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

The idea behind Northland Power and Zurich Insurance 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..