Correlation Between Zurich Insurance and Gap
Can any of the company-specific risk be diversified away by investing in both Zurich Insurance and Gap 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 Gap 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 The Gap, you can compare the effects of market volatilities on Zurich Insurance and Gap 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 Gap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zurich Insurance and Gap.
Diversification Opportunities for Zurich Insurance and Gap
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Zurich and Gap is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Zurich Insurance Group and The Gap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap 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 Gap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap has no effect on the direction of Zurich Insurance i.e., Zurich Insurance and Gap go up and down completely randomly.
Pair Corralation between Zurich Insurance and Gap
Assuming the 90 days trading horizon Zurich Insurance is expected to generate 1.74 times less return on investment than Gap. But when comparing it to its historical volatility, Zurich Insurance Group is 2.95 times less risky than Gap. It trades about 0.3 of its potential returns per unit of risk. The Gap is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 1,872 in The Gap on September 2, 2024 and sell it today you would earn a total of 402.00 from holding The Gap or generate 21.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Zurich Insurance Group vs. The Gap
Performance |
| Timeline |
| Zurich Insurance |
| Gap |
Zurich Insurance and Gap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zurich Insurance and Gap
The main advantage of trading using opposite Zurich Insurance and Gap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zurich Insurance position performs unexpectedly, Gap 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 Gap will offset losses from the drop in Gap's long position.| Zurich Insurance vs. Berkshire Hathaway | Zurich Insurance vs. Sun Life Financial | Zurich Insurance vs. Arch Capital Group |
| Gap vs. Universal Insurance Holdings | Gap vs. QBE Insurance Group | Gap vs. United Insurance Holdings | Gap vs. Khiron Life Sciences |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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