Correlation Between Zurich Insurance and Roche Holding
Can any of the company-specific risk be diversified away by investing in both Zurich Insurance and Roche Holding 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 Roche Holding 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 Roche Holding AG, you can compare the effects of market volatilities on Zurich Insurance and Roche Holding 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 Roche Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zurich Insurance and Roche Holding.
Diversification Opportunities for Zurich Insurance and Roche Holding
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Zurich and Roche is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Zurich Insurance Group and Roche Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roche Holding AG 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 Roche Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roche Holding AG has no effect on the direction of Zurich Insurance i.e., Zurich Insurance and Roche Holding go up and down completely randomly.
Pair Corralation between Zurich Insurance and Roche Holding
Assuming the 90 days trading horizon Zurich Insurance is expected to generate 6.39 times less return on investment than Roche Holding. But when comparing it to its historical volatility, Zurich Insurance Group is 1.04 times less risky than Roche Holding. It trades about 0.08 of its potential returns per unit of risk. Roche Holding AG is currently generating about 0.48 of returns per unit of risk over similar time horizon. If you would invest 27,240 in Roche Holding AG on November 3, 2024 and sell it today you would earn a total of 3,100 from holding Roche Holding AG or generate 11.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Zurich Insurance Group vs. Roche Holding AG
Performance |
| Timeline |
| Zurich Insurance |
| Roche Holding AG |
Zurich Insurance and Roche Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zurich Insurance and Roche Holding
The main advantage of trading using opposite Zurich Insurance and Roche Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zurich Insurance position performs unexpectedly, Roche Holding 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 Roche Holding will offset losses from the drop in Roche Holding's long position.| Zurich Insurance vs. Swiss Re AG | Zurich Insurance vs. Novartis AG | Zurich Insurance vs. Swiss Life Holding | Zurich Insurance vs. UBS Group AG |
| Roche Holding vs. Novartis AG | Roche Holding vs. Zurich Insurance Group | Roche Holding vs. Nestl SA | Roche Holding vs. Lonza 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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