Correlation Between Zurich Insurance and Flughafen Zurich

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

Diversification Opportunities for Zurich Insurance and Flughafen Zurich

0.78

Correlation Coefficient

Zurich Insurance  Flughafen Zurich

Poor diversification

The 3 months correlation between Zurich and Flughafen is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Zurich Insurance Group and Flughafen Zurich in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flughafen Zurich 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 Flughafen Zurich. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flughafen Zurich has no effect on the direction of Zurich Insurance i.e., Zurich Insurance and Flughafen Zurich go up and down completely randomly.

Pair Corralation between Zurich Insurance and Flughafen Zurich

Assuming the 90 days trading horizon Zurich Insurance Group is expected to generate 0.83 times more return on investment than Flughafen Zurich. However, Zurich Insurance Group is 1.2 times less risky than Flughafen Zurich. It trades about 0.23 of its potential returns per unit of risk. Flughafen Zurich is currently generating about 0.17 per unit of risk. If you would invest  49,390  in Zurich Insurance Group on September 5, 2024 and sell it today you would earn a total of  6,130  from holding Zurich Insurance Group or generate 12.41% return on investment over 90 days.

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

Zurich Insurance Group  vs.  Flughafen Zurich

Zurich Insurance

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zurich Insurance Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Zurich Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Flughafen Zurich

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Flughafen Zurich are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Flughafen Zurich may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Zurich Insurance and Flughafen Zurich

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

The idea behind Zurich Insurance Group and Flughafen Zurich 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.