Correlation Between CVS Health and Zurich Insurance

Can any of the company-specific risk be diversified away by investing in both CVS Health 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 CVS Health and Zurich Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CVS Health Corp and Zurich Insurance Group, you can compare the effects of market volatilities on CVS Health 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 CVS Health with a short position of Zurich Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Zurich Insurance.

Diversification Opportunities for CVS Health and Zurich Insurance

-0.39

Correlation Coefficient

CVS Health  Zurich Insurance

Very good diversification

The 3 months correlation between CVS and Zurich is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and Zurich Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zurich Insurance and CVS Health 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 CVS Health Corp 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 CVS Health i.e., CVS Health and Zurich Insurance go up and down completely randomly.

Pair Corralation between CVS Health and Zurich Insurance

Assuming the 90 days trading horizon CVS Health Corp is expected to under-perform the Zurich Insurance. In addition to that, CVS Health is 3.86 times more volatile than Zurich Insurance Group. It trades about -0.12 of its total potential returns per unit of risk. Zurich Insurance Group is currently generating about 0.07 per unit of volatility. If you would invest  51,460  in Zurich Insurance Group on September 24, 2024 and sell it today you would earn a total of  1,750  from holding Zurich Insurance Group or generate 3.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

CVS Health Corp  vs.  Zurich Insurance Group

CVS Health Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Zurich Insurance

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zurich Insurance Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Zurich Insurance is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CVS Health and Zurich Insurance

The main advantage of trading using opposite CVS Health and Zurich Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health 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.

The idea behind CVS Health Corp and Zurich Insurance Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.