Correlation Between Zurich Insurance and GEAR4MUSIC (HLDGS)

Can any of the company-specific risk be diversified away by investing in both Zurich Insurance and GEAR4MUSIC (HLDGS) 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 GEAR4MUSIC (HLDGS) 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 GEAR4MUSIC LS 10, you can compare the effects of market volatilities on Zurich Insurance and GEAR4MUSIC (HLDGS) 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 GEAR4MUSIC (HLDGS). Check out your portfolio center. Please also check ongoing floating volatility patterns of Zurich Insurance and GEAR4MUSIC (HLDGS).

Diversification Opportunities for Zurich Insurance and GEAR4MUSIC (HLDGS)

-0.03

Correlation Coefficient

Zurich Insurance  GEAR4MUSIC (HLDGS)

Good diversification

The 3 months correlation between Zurich and GEAR4MUSIC is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Zurich Insurance Group and GEAR4MUSIC LS 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEAR4MUSIC (HLDGS) 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 GEAR4MUSIC (HLDGS). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEAR4MUSIC (HLDGS) has no effect on the direction of Zurich Insurance i.e., Zurich Insurance and GEAR4MUSIC (HLDGS) go up and down completely randomly.

Pair Corralation between Zurich Insurance and GEAR4MUSIC (HLDGS)

Assuming the 90 days trading horizon Zurich Insurance Group is expected to under-perform the GEAR4MUSIC (HLDGS). But the stock apears to be less risky and, when comparing its historical volatility, Zurich Insurance Group is 1.47 times less risky than GEAR4MUSIC (HLDGS). The stock trades about -0.13 of its potential returns per unit of risk. The GEAR4MUSIC LS 10 is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  193.00  in GEAR4MUSIC LS 10 on October 10, 2024 and sell it today you would lose (3.00) from holding GEAR4MUSIC LS 10 or give up 1.55% of portfolio value over 90 days.

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

Zurich Insurance Group  vs.  GEAR4MUSIC LS 10

Zurich Insurance

Risk-Adjusted Performance

5 of 100

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 February 2025.

GEAR4MUSIC (HLDGS)

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GEAR4MUSIC LS 10 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, GEAR4MUSIC (HLDGS) is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Zurich Insurance and GEAR4MUSIC (HLDGS)

The main advantage of trading using opposite Zurich Insurance and GEAR4MUSIC (HLDGS) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zurich Insurance position performs unexpectedly, GEAR4MUSIC (HLDGS) 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 GEAR4MUSIC (HLDGS) will offset losses from the drop in GEAR4MUSIC (HLDGS)'s long position.

The idea behind Zurich Insurance Group and GEAR4MUSIC LS 10 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.