Correlation Between CNA Financial and Donegal Group
Can any of the company-specific risk be diversified away by investing in both CNA Financial and Donegal Group 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 CNA Financial and Donegal Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CNA Financial and Donegal Group B, you can compare the effects of market volatilities on CNA Financial and Donegal Group 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 CNA Financial with a short position of Donegal Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNA Financial and Donegal Group.
Diversification Opportunities for CNA Financial and Donegal Group
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CNA and Donegal is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding CNA Financial and Donegal Group B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Donegal Group B and CNA Financial 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 CNA Financial are associated (or correlated) with Donegal Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Donegal Group B has no effect on the direction of CNA Financial i.e., CNA Financial and Donegal Group go up and down completely randomly.
Pair Corralation between CNA Financial and Donegal Group
Considering the 90-day investment horizon CNA Financial is expected to generate 0.36 times more return on investment than Donegal Group. However, CNA Financial is 2.8 times less risky than Donegal Group. It trades about 0.08 of its potential returns per unit of risk. Donegal Group B is currently generating about 0.02 per unit of risk. If you would invest 3,648 in CNA Financial on August 28, 2024 and sell it today you would earn a total of 1,324 from holding CNA Financial or generate 36.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 79.66% |
| Values | Daily Returns |
CNA Financial vs. Donegal Group B
Performance |
| Timeline |
| CNA Financial |
| Donegal Group B |
CNA Financial and Donegal Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CNA Financial and Donegal Group
The main advantage of trading using opposite CNA Financial and Donegal Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNA Financial position performs unexpectedly, Donegal Group 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 Donegal Group will offset losses from the drop in Donegal Group's long position.| CNA Financial vs. Selective Insurance Group | CNA Financial vs. Kemper | CNA Financial vs. Donegal Group B | CNA Financial vs. Argo Group International |
| Donegal Group vs. Horace Mann Educators | Donegal Group vs. United Fire Group | Donegal Group vs. Donegal Group A | Donegal Group vs. Global Indemnity PLC |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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