Correlation Between ZURICH INSURANCE and Xcel Energy

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

Diversification Opportunities for ZURICH INSURANCE and Xcel Energy

0.83

Correlation Coefficient

ZURICH INSURANCE  Xcel Energy

Very poor diversification

The 3 months correlation between ZURICH and Xcel is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding ZURICH INSURANCE GROUP and Xcel Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xcel Energy 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 Xcel Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xcel Energy has no effect on the direction of ZURICH INSURANCE i.e., ZURICH INSURANCE and Xcel Energy go up and down completely randomly.

Pair Corralation between ZURICH INSURANCE and Xcel Energy

Assuming the 90 days trading horizon ZURICH INSURANCE is expected to generate 1.79 times less return on investment than Xcel Energy. But when comparing it to its historical volatility, ZURICH INSURANCE GROUP is 1.67 times less risky than Xcel Energy. It trades about 0.12 of its potential returns per unit of risk. Xcel Energy is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  5,627  in Xcel Energy on October 10, 2024 and sell it today you would earn a total of  682.00  from holding Xcel Energy or generate 12.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

ZURICH INSURANCE GROUP  vs.  Xcel Energy

ZURICH INSURANCE

Risk-Adjusted Performance

9 of 100

OK

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. In spite of comparatively unsteady basic indicators, ZURICH INSURANCE may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Xcel Energy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xcel Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Xcel Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ZURICH INSURANCE and Xcel Energy

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

The idea behind ZURICH INSURANCE GROUP and Xcel Energy 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.