Correlation Between ZF Commercial and General Insurance

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

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

Diversification Opportunities for ZF Commercial and General Insurance

-0.63

Correlation Coefficient

ZF Commercial  General Insurance

Excellent diversification

The 3 months correlation between ZFCVINDIA and General is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding ZF Commercial Vehicle and General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Insurance and ZF Commercial 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 ZF Commercial Vehicle are associated (or correlated) with General Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Insurance has no effect on the direction of ZF Commercial i.e., ZF Commercial and General Insurance go up and down completely randomly.

Pair Corralation between ZF Commercial and General Insurance

Assuming the 90 days trading horizon ZF Commercial Vehicle is expected to under-perform the General Insurance. But the stock apears to be less risky and, when comparing its historical volatility, ZF Commercial Vehicle is 1.15 times less risky than General Insurance. The stock trades about -0.22 of its potential returns per unit of risk. The General Insurance is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  40,130  in General Insurance on September 27, 2024 and sell it today you would earn a total of  6,760  from holding General Insurance or generate 16.85% return on investment over 90 days.

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

ZF Commercial Vehicle  vs.  General Insurance

ZF Commercial Vehicle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZF Commercial Vehicle has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

General Insurance

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Insurance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, General Insurance displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ZF Commercial and General Insurance

The main advantage of trading using opposite ZF Commercial and General Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZF Commercial position performs unexpectedly, General 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 General Insurance will offset losses from the drop in General Insurance's long position.

The idea behind ZF Commercial Vehicle and General Insurance 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.