Correlation Between Zurich Insurance and Banco Santander

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

Diversification Opportunities for Zurich Insurance and Banco Santander

0.54

Correlation Coefficient

Zurich Insurance  Banco Santander

Very weak diversification

The 3 months correlation between Zurich and Banco is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Zurich Insurance Group and Banco Santander SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander SA 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 Banco Santander. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Santander SA has no effect on the direction of Zurich Insurance i.e., Zurich Insurance and Banco Santander go up and down completely randomly.

Pair Corralation between Zurich Insurance and Banco Santander

Assuming the 90 days horizon Zurich Insurance Group is expected to under-perform the Banco Santander. But the otc stock apears to be less risky and, when comparing its historical volatility, Zurich Insurance Group is 1.69 times less risky than Banco Santander. The otc stock trades about -0.2 of its potential returns per unit of risk. The Banco Santander SA is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  476.00  in Banco Santander SA on January 25, 2024 and sell it today you would earn a total of  29.00  from holding Banco Santander SA or generate 6.09% return on investment over 90 days.

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

Zurich Insurance Group  vs.  Banco Santander SA

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. In spite of fairly strong basic indicators, Zurich Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Banco Santander SA

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander SA are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Banco Santander displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zurich Insurance and Banco Santander

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

The idea behind Zurich Insurance Group and Banco Santander SA 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.