Correlation Between American International and Zurich Insurance

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

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

Diversification Opportunities for American International and Zurich Insurance

-0.01

Correlation Coefficient

American International  Zurich Insurance

Good diversification

The 3 months correlation between American and Zurich is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding American International Group and Zurich Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zurich Insurance and American International 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 American International Group 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 American International i.e., American International and Zurich Insurance go up and down completely randomly.

Pair Corralation between American International and Zurich Insurance

Considering the 90-day investment horizon American International Group is expected to generate 1.44 times more return on investment than Zurich Insurance. However, American International is 1.44 times more volatile than Zurich Insurance Group. It trades about 0.07 of its potential returns per unit of risk. Zurich Insurance Group is currently generating about 0.1 per unit of risk. If you would invest  5,263  in American International Group on September 19, 2024 and sell it today you would earn a total of  1,946  from holding American International Group or generate 36.98% return on investment over 90 days.

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

American International Group  vs.  Zurich Insurance Group

American International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American International Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, American International is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Zurich Insurance

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zurich Insurance Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Zurich Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American International and Zurich Insurance

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

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.