Correlation Between Nestl SA and Zurich Insurance
Can any of the company-specific risk be diversified away by investing in both Nestl SA and Zurich Insurance 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 Nestl SA and Zurich Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nestl SA and Zurich Insurance Group, you can compare the effects of market volatilities on Nestl SA and Zurich Insurance 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 Nestl SA with a short position of Zurich Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestl SA and Zurich Insurance.
Diversification Opportunities for Nestl SA and Zurich Insurance
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Nestl and Zurich is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Nestl SA and Zurich Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zurich Insurance and Nestl SA 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 Nestl SA are associated (or correlated) with Zurich Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zurich Insurance has no effect on the direction of Nestl SA i.e., Nestl SA and Zurich Insurance go up and down completely randomly.
Pair Corralation between Nestl SA and Zurich Insurance
Assuming the 90 days trading horizon Nestl SA is expected to under-perform the Zurich Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Nestl SA is 1.13 times less risky than Zurich Insurance. The stock trades about -0.57 of its potential returns per unit of risk. The Zurich Insurance Group is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 51,960 in Zurich Insurance Group on August 24, 2024 and sell it today you would earn a total of 2,800 from holding Zurich Insurance Group or generate 5.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nestl SA vs. Zurich Insurance Group
Performance |
| Timeline |
| Nestl SA |
| Zurich Insurance |
Nestl SA and Zurich Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nestl SA and Zurich Insurance
The main advantage of trading using opposite Nestl SA and Zurich Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestl SA position performs unexpectedly, Zurich Insurance 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 Zurich Insurance will offset losses from the drop in Zurich Insurance's long position.| Nestl SA vs. Novartis AG | Nestl SA vs. Roche Holding AG | Nestl SA vs. Zurich Insurance Group | Nestl SA vs. Swiss Re AG |
| Zurich Insurance vs. Swiss Re AG | Zurich Insurance vs. Novartis AG | Zurich Insurance vs. Swiss Life Holding | Zurich Insurance vs. UBS Group AG |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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