Correlation Between Zurich Insurance and American Electric
Can any of the company-specific risk be diversified away by investing in both Zurich Insurance and American Electric 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 American Electric 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 American Electric Power, you can compare the effects of market volatilities on Zurich Insurance and American Electric 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 American Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zurich Insurance and American Electric.
Diversification Opportunities for Zurich Insurance and American Electric
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Zurich and American is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Zurich Insurance Group and American Electric Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Electric Power 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 American Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Electric Power has no effect on the direction of Zurich Insurance i.e., Zurich Insurance and American Electric go up and down completely randomly.
Pair Corralation between Zurich Insurance and American Electric
Assuming the 90 days trading horizon Zurich Insurance Group is expected to generate 1.27 times more return on investment than American Electric. However, Zurich Insurance is 1.27 times more volatile than American Electric Power. It trades about 0.06 of its potential returns per unit of risk. American Electric Power is currently generating about 0.02 per unit of risk. If you would invest 1,986 in Zurich Insurance Group on September 12, 2024 and sell it today you would earn a total of 974.00 from holding Zurich Insurance Group or generate 49.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Zurich Insurance Group vs. American Electric Power
Performance |
| Timeline |
| Zurich Insurance |
| American Electric Power |
Zurich Insurance and American Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zurich Insurance and American Electric
The main advantage of trading using opposite Zurich Insurance and American Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zurich Insurance position performs unexpectedly, American Electric 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 American Electric will offset losses from the drop in American Electric's long position.| Zurich Insurance vs. Corsair Gaming | Zurich Insurance vs. MeVis Medical Solutions | Zurich Insurance vs. Air New Zealand | Zurich Insurance vs. SAFETY MEDICAL PROD |
| American Electric vs. Zurich Insurance Group | American Electric vs. Gaztransport Technigaz SA | American Electric vs. BII Railway Transportation | American Electric vs. Goosehead Insurance |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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