Correlation Between Zurich Insurance and AECOM

Can any of the company-specific risk be diversified away by investing in both Zurich Insurance and AECOM 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 AECOM 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 AECOM, you can compare the effects of market volatilities on Zurich Insurance and AECOM 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 AECOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zurich Insurance and AECOM.

Diversification Opportunities for Zurich Insurance and AECOM

0.8

Correlation Coefficient

Zurich Insurance  AECOM

Very poor diversification

The 3 months correlation between Zurich and AECOM is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Zurich Insurance Group and AECOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AECOM 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 AECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AECOM has no effect on the direction of Zurich Insurance i.e., Zurich Insurance and AECOM go up and down completely randomly.

Pair Corralation between Zurich Insurance and AECOM

Assuming the 90 days trading horizon Zurich Insurance is expected to generate 1.4 times less return on investment than AECOM. In addition to that, Zurich Insurance is 1.08 times more volatile than AECOM. It trades about 0.12 of its total potential returns per unit of risk. AECOM is currently generating about 0.18 per unit of volatility. If you would invest  8,679  in AECOM on September 13, 2024 and sell it today you would earn a total of  2,021  from holding AECOM or generate 23.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Zurich Insurance Group  vs.  AECOM

Zurich Insurance

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zurich Insurance Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Zurich Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

AECOM

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AECOM are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, AECOM reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zurich Insurance and AECOM

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

The idea behind Zurich Insurance Group and AECOM 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.