Correlation Between Sampo OYJ and Zurich Insurance

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

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

Diversification Opportunities for Sampo OYJ and Zurich Insurance

0.29

Correlation Coefficient

Sampo OYJ  Zurich Insurance

Modest diversification

The 3 months correlation between Sampo and Zurich is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Sampo OYJ and Zurich Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zurich Insurance and Sampo OYJ 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 Sampo OYJ 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 Sampo OYJ i.e., Sampo OYJ and Zurich Insurance go up and down completely randomly.

Pair Corralation between Sampo OYJ and Zurich Insurance

Assuming the 90 days horizon Sampo OYJ is expected to generate 1.65 times more return on investment than Zurich Insurance. However, Sampo OYJ is 1.65 times more volatile than Zurich Insurance Group. It trades about 0.03 of its potential returns per unit of risk. Zurich Insurance Group is currently generating about -0.08 per unit of risk. If you would invest  2,007  in Sampo OYJ on February 4, 2024 and sell it today you would earn a total of  16.00  from holding Sampo OYJ or generate 0.8% return on investment over 90 days.

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

Sampo OYJ  vs.  Zurich Insurance Group

Sampo OYJ

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sampo OYJ are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Sampo OYJ is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Zurich Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sampo OYJ and Zurich Insurance

The main advantage of trading using opposite Sampo OYJ and Zurich Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sampo OYJ 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 Sampo OYJ 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.