Correlation Between ZURICH INSURANCE and LOREAL ADR

Can any of the company-specific risk be diversified away by investing in both ZURICH INSURANCE and LOREAL ADR 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 LOREAL ADR 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 LOREAL ADR 15EO, you can compare the effects of market volatilities on ZURICH INSURANCE and LOREAL ADR 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 LOREAL ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZURICH INSURANCE and LOREAL ADR.

Diversification Opportunities for ZURICH INSURANCE and LOREAL ADR

-0.54

Correlation Coefficient

ZURICH INSURANCE  LOREAL ADR

Excellent diversification

The 3 months correlation between ZURICH and LOREAL is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding ZURICH INSURANCE GROUP and LOREAL ADR 15EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOREAL ADR 15EO 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 LOREAL ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOREAL ADR 15EO has no effect on the direction of ZURICH INSURANCE i.e., ZURICH INSURANCE and LOREAL ADR go up and down completely randomly.

Pair Corralation between ZURICH INSURANCE and LOREAL ADR

Assuming the 90 days trading horizon ZURICH INSURANCE GROUP is expected to generate 0.56 times more return on investment than LOREAL ADR. However, ZURICH INSURANCE GROUP is 1.78 times less risky than LOREAL ADR. It trades about 0.12 of its potential returns per unit of risk. LOREAL ADR 15EO is currently generating about -0.06 per unit of risk. If you would invest  2,420  in ZURICH INSURANCE GROUP on October 21, 2024 and sell it today you would earn a total of  420.00  from holding ZURICH INSURANCE GROUP or generate 17.36% 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.  LOREAL ADR 15EO

ZURICH INSURANCE

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ZURICH INSURANCE GROUP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ZURICH INSURANCE is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

LOREAL ADR 15EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LOREAL ADR 15EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, LOREAL ADR 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 LOREAL ADR

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

The idea behind ZURICH INSURANCE GROUP and LOREAL ADR 15EO 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.