Correlation Between CHINA HUARONG and Zurich Insurance
Can any of the company-specific risk be diversified away by investing in both CHINA HUARONG 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 CHINA HUARONG and Zurich Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHINA HUARONG ENERHD 50 and Zurich Insurance Group, you can compare the effects of market volatilities on CHINA HUARONG 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 CHINA HUARONG with a short position of Zurich Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA HUARONG and Zurich Insurance.
Diversification Opportunities for CHINA HUARONG and Zurich Insurance
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CHINA and Zurich is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding CHINA HUARONG ENERHD 50 and Zurich Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zurich Insurance and CHINA HUARONG 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 CHINA HUARONG ENERHD 50 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 CHINA HUARONG i.e., CHINA HUARONG and Zurich Insurance go up and down completely randomly.
Pair Corralation between CHINA HUARONG and Zurich Insurance
Assuming the 90 days trading horizon CHINA HUARONG ENERHD 50 is expected to generate 18.48 times more return on investment than Zurich Insurance. However, CHINA HUARONG is 18.48 times more volatile than Zurich Insurance Group. It trades about 0.05 of its potential returns per unit of risk. Zurich Insurance Group is currently generating about 0.08 per unit of risk. If you would invest 0.20 in CHINA HUARONG ENERHD 50 on November 3, 2024 and sell it today you would lose (0.10) from holding CHINA HUARONG ENERHD 50 or give up 50.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHINA HUARONG ENERHD 50 vs. Zurich Insurance Group
Performance |
| Timeline |
| CHINA HUARONG ENERHD |
| Zurich Insurance |
CHINA HUARONG and Zurich Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA HUARONG and Zurich Insurance
The main advantage of trading using opposite CHINA HUARONG and Zurich Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA HUARONG 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.| CHINA HUARONG vs. Citic Telecom International | CHINA HUARONG vs. Telecom Argentina SA | CHINA HUARONG vs. Spirent Communications plc | CHINA HUARONG vs. COMBA TELECOM SYST |
| Zurich Insurance vs. Eastman Chemical | Zurich Insurance vs. TIANDE CHEMICAL | Zurich Insurance vs. SILICON LABORATOR | Zurich Insurance vs. Adtalem Global Education |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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