Correlation Between Zurich Insurance and First Industrial

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

Diversification Opportunities for Zurich Insurance and First Industrial

-0.02

Correlation Coefficient

Zurich Insurance  First Industrial

Good diversification

The 3 months correlation between Zurich and First is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Zurich Insurance Group and First Industrial Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Industrial Realty 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 First Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Industrial Realty has no effect on the direction of Zurich Insurance i.e., Zurich Insurance and First Industrial go up and down completely randomly.

Pair Corralation between Zurich Insurance and First Industrial

Assuming the 90 days trading horizon Zurich Insurance Group is expected to under-perform the First Industrial. In addition to that, Zurich Insurance is 1.07 times more volatile than First Industrial Realty. It trades about -0.03 of its total potential returns per unit of risk. First Industrial Realty is currently generating about 0.21 per unit of volatility. If you would invest  4,783  in First Industrial Realty on October 25, 2024 and sell it today you would earn a total of  317.00  from holding First Industrial Realty or generate 6.63% return on investment over 90 days.

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

Zurich Insurance Group  vs.  First Industrial Realty

Zurich Insurance

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zurich Insurance Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, Zurich Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

First Industrial Realty

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Industrial Realty are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, First Industrial 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 First Industrial

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

The idea behind Zurich Insurance Group and First Industrial Realty 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.