Correlation Between Zurich Insurance and Luzerner Kantonalbank

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

Diversification Opportunities for Zurich Insurance and Luzerner Kantonalbank

0.26

Correlation Coefficient

Zurich Insurance  Luzerner Kantonalbank

Modest diversification

The 3 months correlation between Zurich and Luzerner is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Zurich Insurance Group and Luzerner Kantonalbank AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luzerner Kantonalbank 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 Luzerner Kantonalbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luzerner Kantonalbank has no effect on the direction of Zurich Insurance i.e., Zurich Insurance and Luzerner Kantonalbank go up and down completely randomly.

Pair Corralation between Zurich Insurance and Luzerner Kantonalbank

Assuming the 90 days trading horizon Zurich Insurance Group is expected to generate 1.1 times more return on investment than Luzerner Kantonalbank. However, Zurich Insurance is 1.1 times more volatile than Luzerner Kantonalbank AG. It trades about 0.27 of its potential returns per unit of risk. Luzerner Kantonalbank AG is currently generating about 0.18 per unit of risk. If you would invest  54,500  in Zurich Insurance Group on December 31, 2024 and sell it today you would earn a total of  7,640  from holding Zurich Insurance Group or generate 14.02% return on investment over 90 days.

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

Zurich Insurance Group  vs.  Luzerner Kantonalbank AG

Zurich Insurance

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zurich Insurance Group are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Zurich Insurance showed solid returns over the last few months and may actually be approaching a breakup point.

Luzerner Kantonalbank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Luzerner Kantonalbank AG are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Luzerner Kantonalbank may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with Zurich Insurance and Luzerner Kantonalbank

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

The idea behind Zurich Insurance Group and Luzerner Kantonalbank AG 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.