Correlation Between Zurich Insurance and Linde Plc

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

Diversification Opportunities for Zurich Insurance and Linde Plc

0.46

Correlation Coefficient

Zurich Insurance  Linde Plc

Very weak diversification

The 3 months correlation between Zurich and Linde is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Zurich Insurance Group and Linde plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linde plc 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 Linde Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linde plc has no effect on the direction of Zurich Insurance i.e., Zurich Insurance and Linde Plc go up and down completely randomly.

Pair Corralation between Zurich Insurance and Linde Plc

Assuming the 90 days trading horizon Zurich Insurance Group is expected to generate 2.71 times more return on investment than Linde Plc. However, Zurich Insurance is 2.71 times more volatile than Linde plc. It trades about 0.12 of its potential returns per unit of risk. Linde plc is currently generating about 0.09 per unit of risk. If you would invest  2,820  in Zurich Insurance Group on December 26, 2024 and sell it today you would earn a total of  480.00  from holding Zurich Insurance Group or generate 17.02% return on investment over 90 days.

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

Zurich Insurance Group  vs.  Linde plc

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 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady forward indicators, Zurich Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Linde plc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Linde plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Linde Plc 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 Linde Plc

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

The idea behind Zurich Insurance Group and Linde plc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.