Correlation Between Donegal Group and HCI
Can any of the company-specific risk be diversified away by investing in both Donegal Group and HCI 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 Donegal Group and HCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Donegal Group A and HCI Group, you can compare the effects of market volatilities on Donegal Group and HCI 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 Donegal Group with a short position of HCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Donegal Group and HCI.
Diversification Opportunities for Donegal Group and HCI
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Donegal and HCI is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Donegal Group A and HCI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCI Group and Donegal Group 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 Donegal Group A are associated (or correlated) with HCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCI Group has no effect on the direction of Donegal Group i.e., Donegal Group and HCI go up and down completely randomly.
Pair Corralation between Donegal Group and HCI
Assuming the 90 days horizon Donegal Group is expected to generate 3.83 times less return on investment than HCI. But when comparing it to its historical volatility, Donegal Group A is 1.74 times less risky than HCI. It trades about 0.05 of its potential returns per unit of risk. HCI Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 5,612 in HCI Group on August 25, 2024 and sell it today you would earn a total of 5,525 from holding HCI Group or generate 98.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Donegal Group A vs. HCI Group
Performance |
| Timeline |
| Donegal Group A |
| HCI Group |
Donegal Group and HCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Donegal Group and HCI
The main advantage of trading using opposite Donegal Group and HCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Donegal Group position performs unexpectedly, HCI 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 HCI will offset losses from the drop in HCI's long position.| Donegal Group vs. NI Holdings | Donegal Group vs. Horace Mann Educators | Donegal Group vs. Global Indemnity PLC | Donegal Group vs. Selective Insurance Group |
| HCI vs. Universal Insurance Holdings | HCI vs. Kingstone Companies | HCI vs. Horace Mann Educators | HCI vs. Heritage Insurance Hldgs |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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