Correlation Between Premier Foods and Zurich Insurance
Can any of the company-specific risk be diversified away by investing in both Premier Foods 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 Premier Foods and Zurich Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Premier Foods PLC and Zurich Insurance Group, you can compare the effects of market volatilities on Premier Foods 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 Premier Foods with a short position of Zurich Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier Foods and Zurich Insurance.
Diversification Opportunities for Premier Foods and Zurich Insurance
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Premier and Zurich is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods PLC and Zurich Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zurich Insurance and Premier Foods 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 Premier Foods PLC 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 Premier Foods i.e., Premier Foods and Zurich Insurance go up and down completely randomly.
Pair Corralation between Premier Foods and Zurich Insurance
Assuming the 90 days trading horizon Premier Foods is expected to generate 5.03 times less return on investment than Zurich Insurance. But when comparing it to its historical volatility, Premier Foods PLC is 1.17 times less risky than Zurich Insurance. It trades about 0.06 of its potential returns per unit of risk. Zurich Insurance Group is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 54,760 in Zurich Insurance Group on November 28, 2024 and sell it today you would earn a total of 3,940 from holding Zurich Insurance Group or generate 7.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Premier Foods PLC vs. Zurich Insurance Group
Performance |
| Timeline |
| Premier Foods PLC |
| Zurich Insurance |
Premier Foods and Zurich Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Premier Foods and Zurich Insurance
The main advantage of trading using opposite Premier Foods and Zurich Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premier Foods 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.| Premier Foods vs. Porvair plc | Premier Foods vs. Alfa Financial Software | Premier Foods vs. Bytes Technology | Premier Foods vs. Tata Steel Limited |
| Zurich Insurance vs. Tatton Asset Management | Zurich Insurance vs. Fevertree Drinks Plc | Zurich Insurance vs. InterContinental Hotels Group | Zurich Insurance vs. Host Hotels Resorts |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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