Correlation Between Zurich Insurance and BYD Company

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

Diversification Opportunities for Zurich Insurance and BYD Company

-0.41

Correlation Coefficient

Zurich Insurance  BYD Company

Very good diversification

The 3 months correlation between Zurich and BYD is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Zurich Insurance Group and BYD Company Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Limited 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 BYD Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BYD Limited has no effect on the direction of Zurich Insurance i.e., Zurich Insurance and BYD Company go up and down completely randomly.

Pair Corralation between Zurich Insurance and BYD Company

Assuming the 90 days trading horizon Zurich Insurance Group is expected to generate 0.57 times more return on investment than BYD Company. However, Zurich Insurance Group is 1.75 times less risky than BYD Company. It trades about 0.05 of its potential returns per unit of risk. BYD Company Limited is currently generating about 0.03 per unit of risk. 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

Zurich Insurance Group  vs.  BYD Company Limited

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.

BYD Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Zurich Insurance and BYD Company

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

The idea behind Zurich Insurance Group and BYD Company Limited 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.