Correlation Between Broadwind and Selective Insurance
Can any of the company-specific risk be diversified away by investing in both Broadwind and Selective 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 Broadwind and Selective Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Broadwind and Selective Insurance Group, you can compare the effects of market volatilities on Broadwind and Selective 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 Broadwind with a short position of Selective Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Broadwind and Selective Insurance.
Diversification Opportunities for Broadwind and Selective Insurance
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Broadwind and Selective is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Broadwind and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance and Broadwind 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 Broadwind are associated (or correlated) with Selective Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selective Insurance has no effect on the direction of Broadwind i.e., Broadwind and Selective Insurance go up and down completely randomly.
Pair Corralation between Broadwind and Selective Insurance
Assuming the 90 days trading horizon Broadwind is expected to generate 1.24 times less return on investment than Selective Insurance. In addition to that, Broadwind is 2.75 times more volatile than Selective Insurance Group. It trades about 0.07 of its total potential returns per unit of risk. Selective Insurance Group is currently generating about 0.25 per unit of volatility. If you would invest 8,316 in Selective Insurance Group on September 2, 2024 and sell it today you would earn a total of 984.00 from holding Selective Insurance Group or generate 11.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Broadwind vs. Selective Insurance Group
Performance |
| Timeline |
| Broadwind |
| Selective Insurance |
Broadwind and Selective Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Broadwind and Selective Insurance
The main advantage of trading using opposite Broadwind and Selective Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Broadwind position performs unexpectedly, Selective 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 Selective Insurance will offset losses from the drop in Selective Insurance's long position.The idea behind Broadwind and Selective 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.| Selective Insurance vs. Hemisphere Energy Corp | Selective Insurance vs. TOREX SEMICONDUCTOR LTD | Selective Insurance vs. SAFETY MEDICAL PROD | Selective Insurance vs. CompuGroup Medical SE |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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