Correlation Between Donegal Group and White Mountains
Can any of the company-specific risk be diversified away by investing in both Donegal Group and White Mountains 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 White Mountains into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Donegal Group B and White Mountains Insurance, you can compare the effects of market volatilities on Donegal Group and White Mountains 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 White Mountains. Check out your portfolio center. Please also check ongoing floating volatility patterns of Donegal Group and White Mountains.
Diversification Opportunities for Donegal Group and White Mountains
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Donegal and White is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Donegal Group B and White Mountains Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on White Mountains Insurance 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 B are associated (or correlated) with White Mountains. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of White Mountains Insurance has no effect on the direction of Donegal Group i.e., Donegal Group and White Mountains go up and down completely randomly.
Pair Corralation between Donegal Group and White Mountains
Assuming the 90 days horizon Donegal Group B is expected to under-perform the White Mountains. In addition to that, Donegal Group is 1.73 times more volatile than White Mountains Insurance. It trades about -0.04 of its total potential returns per unit of risk. White Mountains Insurance is currently generating about 0.28 per unit of volatility. If you would invest 181,487 in White Mountains Insurance on August 27, 2024 and sell it today you would earn a total of 17,347 from holding White Mountains Insurance or generate 9.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 80.95% |
| Values | Daily Returns |
Donegal Group B vs. White Mountains Insurance
Performance |
| Timeline |
| Donegal Group B |
| White Mountains Insurance |
Donegal Group and White Mountains Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Donegal Group and White Mountains
The main advantage of trading using opposite Donegal Group and White Mountains positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Donegal Group position performs unexpectedly, White Mountains 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 White Mountains will offset losses from the drop in White Mountains' long position.| Donegal Group vs. Horace Mann Educators | Donegal Group vs. United Fire Group | Donegal Group vs. Donegal Group A | Donegal Group vs. Global Indemnity PLC |
| White Mountains vs. NI Holdings | White Mountains vs. Donegal Group A | White Mountains vs. Donegal Group B | White Mountains vs. The Hanover Insurance |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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