Correlation Between Swisscom and Zurich Insurance

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

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

Diversification Opportunities for Swisscom and Zurich Insurance

0.06

Correlation Coefficient

Swisscom  Zurich Insurance

Significant diversification

The 3 months correlation between Swisscom and Zurich is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Swisscom AG and Zurich Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zurich Insurance and Swisscom 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 Swisscom AG 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 Swisscom i.e., Swisscom and Zurich Insurance go up and down completely randomly.

Pair Corralation between Swisscom and Zurich Insurance

Assuming the 90 days trading horizon Swisscom AG is expected to under-perform the Zurich Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Swisscom AG is 1.09 times less risky than Zurich Insurance. The stock trades about 0.0 of its potential returns per unit of risk. The Zurich Insurance Group is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  55,860  in Zurich Insurance Group on November 29, 2024 and sell it today you would earn a total of  3,280  from holding Zurich Insurance Group or generate 5.87% return on investment over 90 days.

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

Swisscom AG  vs.  Zurich Insurance Group

Swisscom AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Swisscom AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Swisscom is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Zurich Insurance

Risk-Adjusted Performance

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 fairly abnormal basic indicators, Zurich Insurance may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Swisscom and Zurich Insurance

The main advantage of trading using opposite Swisscom and Zurich Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swisscom 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 Swisscom AG 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.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.