Correlation Between CNA Financial and Palomar Holdings
Can any of the company-specific risk be diversified away by investing in both CNA Financial and Palomar Holdings 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 Palomar Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CNA Financial and Palomar Holdings, you can compare the effects of market volatilities on CNA Financial and Palomar Holdings 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 Palomar Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of CNA Financial and Palomar Holdings.
Diversification Opportunities for CNA Financial and Palomar Holdings
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CNA and Palomar is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding CNA Financial and Palomar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palomar Holdings 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 Palomar Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palomar Holdings has no effect on the direction of CNA Financial i.e., CNA Financial and Palomar Holdings go up and down completely randomly.
Pair Corralation between CNA Financial and Palomar Holdings
Considering the 90-day investment horizon CNA Financial is expected to generate 2.68 times less return on investment than Palomar Holdings. But when comparing it to its historical volatility, CNA Financial is 1.59 times less risky than Palomar Holdings. It trades about 0.09 of its potential returns per unit of risk. Palomar Holdings is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 10,433 in Palomar Holdings on September 15, 2024 and sell it today you would earn a total of 534.00 from holding Palomar Holdings or generate 5.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CNA Financial vs. Palomar Holdings
Performance |
| Timeline |
| CNA Financial |
| Palomar Holdings |
CNA Financial and Palomar Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CNA Financial and Palomar Holdings
The main advantage of trading using opposite CNA Financial and Palomar Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CNA Financial position performs unexpectedly, Palomar Holdings 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 Palomar Holdings will offset losses from the drop in Palomar Holdings' long position.| CNA Financial vs. Selective Insurance Group | CNA Financial vs. Kemper | CNA Financial vs. Donegal Group B | CNA Financial vs. Argo Group International |
| Palomar Holdings vs. W R Berkley | Palomar Holdings vs. Markel | Palomar Holdings vs. RLI Corp | Palomar Holdings vs. CNA Financial |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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