Correlation Between Zurich Insurance and SBM OFFSHORE

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

Diversification Opportunities for Zurich Insurance and SBM OFFSHORE

0.06

Correlation Coefficient

Zurich Insurance  SBM OFFSHORE

Significant diversification

The 3 months correlation between Zurich and SBM is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Zurich Insurance Group and SBM OFFSHORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM OFFSHORE 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 SBM OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM OFFSHORE has no effect on the direction of Zurich Insurance i.e., Zurich Insurance and SBM OFFSHORE go up and down completely randomly.

Pair Corralation between Zurich Insurance and SBM OFFSHORE

Assuming the 90 days trading horizon Zurich Insurance Group is expected to under-perform the SBM OFFSHORE. In addition to that, Zurich Insurance is 1.7 times more volatile than SBM OFFSHORE. It trades about -0.17 of its total potential returns per unit of risk. SBM OFFSHORE is currently generating about -0.1 per unit of volatility. If you would invest  1,703  in SBM OFFSHORE on October 5, 2024 and sell it today you would lose (28.00) from holding SBM OFFSHORE or give up 1.64% of portfolio value over 90 days.

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

Zurich Insurance Group  vs.  SBM OFFSHORE

Zurich Insurance

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Zurich Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile forward indicators, Zurich Insurance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SBM OFFSHORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBM OFFSHORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, SBM OFFSHORE is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Zurich Insurance and SBM OFFSHORE

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

The idea behind Zurich Insurance Group and SBM OFFSHORE 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.