Correlation Between Zurich Insurance and Sika AG
Can any of the company-specific risk be diversified away by investing in both Zurich Insurance and Sika AG 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 Sika AG 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 Sika AG, you can compare the effects of market volatilities on Zurich Insurance and Sika AG 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 Sika AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zurich Insurance and Sika AG.
Diversification Opportunities for Zurich Insurance and Sika AG
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Zurich and Sika is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Zurich Insurance Group and Sika AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sika 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 Sika AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sika AG has no effect on the direction of Zurich Insurance i.e., Zurich Insurance and Sika AG go up and down completely randomly.
Pair Corralation between Zurich Insurance and Sika AG
Assuming the 90 days trading horizon Zurich Insurance Group is expected to generate 0.79 times more return on investment than Sika AG. However, Zurich Insurance Group is 1.27 times less risky than Sika AG. It trades about 0.28 of its potential returns per unit of risk. Sika AG is currently generating about -0.22 per unit of risk. If you would invest 51,880 in Zurich Insurance Group on August 26, 2024 and sell it today you would earn a total of 3,420 from holding Zurich Insurance Group or generate 6.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Zurich Insurance Group vs. Sika AG
Performance |
| Timeline |
| Zurich Insurance |
| Sika AG |
Zurich Insurance and Sika AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zurich Insurance and Sika AG
The main advantage of trading using opposite Zurich Insurance and Sika AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zurich Insurance position performs unexpectedly, Sika AG 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 Sika AG will offset losses from the drop in Sika AG'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 |
| Sika AG vs. Lonza Group AG | Sika AG vs. Givaudan SA | Sika AG vs. Geberit AG | Sika AG vs. Partners Group Holding |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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