Correlation Between Zurich Insurance and St Galler

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

Diversification Opportunities for Zurich Insurance and St Galler

0.75

Correlation Coefficient

Zurich Insurance  St Galler

Poor diversification

The 3 months correlation between Zurich and SGKN is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Zurich Insurance Group and St Galler Kantonalbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on St Galler 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 St Galler. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of St Galler Kantonalbank has no effect on the direction of Zurich Insurance i.e., Zurich Insurance and St Galler go up and down completely randomly.

Pair Corralation between Zurich Insurance and St Galler

Assuming the 90 days trading horizon Zurich Insurance Group is expected to generate 1.08 times more return on investment than St Galler. However, Zurich Insurance is 1.08 times more volatile than St Galler Kantonalbank. It trades about 0.17 of its potential returns per unit of risk. St Galler Kantonalbank is currently generating about 0.15 per unit of risk. If you would invest  50,360  in Zurich Insurance Group on September 12, 2024 and sell it today you would earn a total of  4,440  from holding Zurich Insurance Group or generate 8.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Zurich Insurance Group  vs.  St Galler Kantonalbank

Zurich Insurance

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zurich Insurance Group are ranked lower than 13 (%) 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.

St Galler Kantonalbank

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in St Galler Kantonalbank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, St Galler may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Zurich Insurance and St Galler

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

The idea behind Zurich Insurance Group and St Galler Kantonalbank 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.

Check out your portfolio center.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.