Correlation Between Waste Management and Zurich Insurance

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

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

Diversification Opportunities for Waste Management and Zurich Insurance

0.72

Correlation Coefficient

Waste Management  Zurich Insurance

Poor diversification

The 3 months correlation between Waste and Zurich is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and Zurich Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zurich Insurance and Waste Management 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 Waste Management 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 Waste Management i.e., Waste Management and Zurich Insurance go up and down completely randomly.

Pair Corralation between Waste Management and Zurich Insurance

Assuming the 90 days trading horizon Waste Management is expected to generate 2.18 times less return on investment than Zurich Insurance. But when comparing it to its historical volatility, Waste Management is 2.07 times less risky than Zurich Insurance. It trades about 0.07 of its potential returns per unit of risk. Zurich Insurance Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,940  in Zurich Insurance Group on December 4, 2024 and sell it today you would earn a total of  260.00  from holding Zurich Insurance Group or generate 8.84% return on investment over 90 days.

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

Waste Management  vs.  Zurich Insurance Group

Waste Management

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Waste Management is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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. Despite nearly fragile forward indicators, Zurich Insurance may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Waste Management and Zurich Insurance

The main advantage of trading using opposite Waste Management and Zurich Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management 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 Waste Management 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.