Correlation Between Donegal Group and Lemonade
Can any of the company-specific risk be diversified away by investing in both Donegal Group and Lemonade 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 Lemonade 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 Lemonade, you can compare the effects of market volatilities on Donegal Group and Lemonade 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 Lemonade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Donegal Group and Lemonade.
Diversification Opportunities for Donegal Group and Lemonade
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Donegal and Lemonade is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Donegal Group A and Lemonade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lemonade 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 Lemonade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lemonade has no effect on the direction of Donegal Group i.e., Donegal Group and Lemonade go up and down completely randomly.
Pair Corralation between Donegal Group and Lemonade
Assuming the 90 days horizon Donegal Group is expected to generate 1.94 times less return on investment than Lemonade. But when comparing it to its historical volatility, Donegal Group A is 5.02 times less risky than Lemonade. It trades about 0.28 of its potential returns per unit of risk. Lemonade is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 3,168 in Lemonade on November 27, 2024 and sell it today you would earn a total of 302.00 from holding Lemonade or generate 9.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Donegal Group A vs. Lemonade
Performance |
| Timeline |
| Donegal Group A |
| Lemonade |
Donegal Group and Lemonade Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Donegal Group and Lemonade
The main advantage of trading using opposite Donegal Group and Lemonade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Donegal Group position performs unexpectedly, Lemonade 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 Lemonade will offset losses from the drop in Lemonade'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 |
| Lemonade vs. Fiverr International | Lemonade vs. Pinterest | Lemonade vs. Upstart Holdings | Lemonade vs. Fastly Inc |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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