Correlation Between IA Financial and Zurich Insurance

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

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

Diversification Opportunities for IA Financial and Zurich Insurance

0.47

Correlation Coefficient

IA Financial  Zurich Insurance

Very weak diversification

The 3 months correlation between IAFNF and Zurich is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding iA Financial and Zurich Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zurich Insurance and IA Financial 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 iA Financial 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 IA Financial i.e., IA Financial and Zurich Insurance go up and down completely randomly.

Pair Corralation between IA Financial and Zurich Insurance

Assuming the 90 days horizon iA Financial is expected to generate 1.8 times more return on investment than Zurich Insurance. However, IA Financial is 1.8 times more volatile than Zurich Insurance Group. It trades about 0.08 of its potential returns per unit of risk. Zurich Insurance Group is currently generating about 0.1 per unit of risk. If you would invest  6,716  in iA Financial on November 20, 2024 and sell it today you would earn a total of  2,443  from holding iA Financial or generate 36.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.65%
Values	Daily Returns

iA Financial  vs.  Zurich Insurance Group

iA Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days iA Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, IA Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Zurich Insurance

Risk-Adjusted Performance

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 fairly strong basic indicators, Zurich Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IA Financial and Zurich Insurance

The main advantage of trading using opposite IA Financial and Zurich Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IA Financial 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 iA Financial 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 Commodity Directory module to find actively traded commodities issued by global exchanges.