Correlation Between ZURICH INSURANCE and United Utilities

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

Diversification Opportunities for ZURICH INSURANCE and United Utilities

-0.31

Correlation Coefficient

ZURICH INSURANCE  United Utilities

Very good diversification

The 3 months correlation between ZURICH and United is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding ZURICH INSURANCE GROUP and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities 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 United Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Utilities has no effect on the direction of ZURICH INSURANCE i.e., ZURICH INSURANCE and United Utilities go up and down completely randomly.

Pair Corralation between ZURICH INSURANCE and United Utilities

Assuming the 90 days trading horizon ZURICH INSURANCE GROUP is expected to generate 0.79 times more return on investment than United Utilities. However, ZURICH INSURANCE GROUP is 1.27 times less risky than United Utilities. It trades about 0.14 of its potential returns per unit of risk. United Utilities Group is currently generating about -0.06 per unit of risk. If you would invest  2,860  in ZURICH INSURANCE GROUP on December 22, 2024 and sell it today you would earn a total of  380.00  from holding ZURICH INSURANCE GROUP or generate 13.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

ZURICH INSURANCE GROUP  vs.  United Utilities Group

ZURICH INSURANCE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ZURICH INSURANCE GROUP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, ZURICH INSURANCE unveiled solid returns over the last few months and may actually be approaching a breakup point.

United Utilities

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Utilities Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with ZURICH INSURANCE and United Utilities

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

The idea behind ZURICH INSURANCE GROUP and United Utilities Group 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..