Correlation Between Zurich Insurance and Hartford Financial

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

Diversification Opportunities for Zurich Insurance and Hartford Financial

0.57

Correlation Coefficient

Zurich Insurance  Hartford Financial

Very weak diversification

The 3 months correlation between Zurich and Hartford is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Zurich Insurance Group and Hartford Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Financial 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 Hartford Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Financial has no effect on the direction of Zurich Insurance i.e., Zurich Insurance and Hartford Financial go up and down completely randomly.

Pair Corralation between Zurich Insurance and Hartford Financial

Assuming the 90 days horizon Zurich Insurance Group is expected to under-perform the Hartford Financial. In addition to that, Zurich Insurance is 1.53 times more volatile than Hartford Financial Services. It trades about -0.05 of its total potential returns per unit of risk. Hartford Financial Services is currently generating about -0.02 per unit of volatility. If you would invest  10,067  in Hartford Financial Services on January 24, 2024 and sell it today you would lose (85.00) from holding Hartford Financial Services or give up 0.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Zurich Insurance Group  vs.  Hartford Financial Services

Zurich Insurance

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zurich Insurance Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Hartford Financial

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hartford Financial Services are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, Hartford Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zurich Insurance and Hartford Financial

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

The idea behind Zurich Insurance Group and Hartford Financial Services 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.