Correlation Between Zurich Insurance and Royal Caribbean

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

Diversification Opportunities for Zurich Insurance and Royal Caribbean

0.83

Correlation Coefficient

Zurich Insurance  Royal Caribbean

Very poor diversification

The 3 months correlation between Zurich and Royal is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Zurich Insurance Group and Royal Caribbean Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Caribbean Group 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 Royal Caribbean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Caribbean Group has no effect on the direction of Zurich Insurance i.e., Zurich Insurance and Royal Caribbean go up and down completely randomly.

Pair Corralation between Zurich Insurance and Royal Caribbean

Assuming the 90 days trading horizon Zurich Insurance is expected to generate 3.97 times less return on investment than Royal Caribbean. In addition to that, Zurich Insurance is 1.0 times more volatile than Royal Caribbean Group. It trades about 0.08 of its total potential returns per unit of risk. Royal Caribbean Group is currently generating about 0.32 per unit of volatility. If you would invest  15,428  in Royal Caribbean Group on September 15, 2024 and sell it today you would earn a total of  7,842  from holding Royal Caribbean Group or generate 50.83% return on investment over 90 days.

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

Zurich Insurance Group  vs.  Royal Caribbean Group

Zurich Insurance

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zurich Insurance Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Zurich Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Royal Caribbean Group

Risk-Adjusted Performance

25 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Caribbean Group are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Royal Caribbean reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zurich Insurance and Royal Caribbean

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

The idea behind Zurich Insurance Group and Royal Caribbean 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.