Correlation Between Zurich Insurance and Swisscom

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

Diversification Opportunities for Zurich Insurance and Swisscom

-0.53

Correlation Coefficient

Zurich Insurance  Swisscom

Excellent diversification

The 3 months correlation between Zurich and Swisscom is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Zurich Insurance Group and Swisscom AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swisscom AG 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 Swisscom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swisscom AG has no effect on the direction of Zurich Insurance i.e., Zurich Insurance and Swisscom go up and down completely randomly.

Pair Corralation between Zurich Insurance and Swisscom

Assuming the 90 days trading horizon Zurich Insurance Group is expected to generate 1.1 times more return on investment than Swisscom. However, Zurich Insurance is 1.1 times more volatile than Swisscom AG. It trades about 0.08 of its potential returns per unit of risk. Swisscom AG is currently generating about 0.02 per unit of risk. If you would invest  40,323  in Zurich Insurance Group on August 31, 2024 and sell it today you would earn a total of  15,277  from holding Zurich Insurance Group or generate 37.89% 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.  Swisscom AG

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 December 2024.

Swisscom AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Swisscom AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Swisscom is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Zurich Insurance and Swisscom

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

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