Correlation Between Global Indemnity and Donegal Group

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Can any of the company-specific risk be diversified away by investing in both Global Indemnity 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 Global Indemnity and Donegal Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Indemnity PLC and Donegal Group B, you can compare the effects of market volatilities on Global Indemnity 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 Global Indemnity with a short position of Donegal Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Indemnity and Donegal Group.

Diversification Opportunities for Global Indemnity and Donegal Group

0.24
  Correlation Coefficient

Modest diversification

The 3 months correlation between Global and Donegal is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Global Indemnity PLC 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 Global Indemnity 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 Global Indemnity PLC 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 Global Indemnity i.e., Global Indemnity and Donegal Group go up and down completely randomly.

Pair Corralation between Global Indemnity and Donegal Group

Given the investment horizon of 90 days Global Indemnity is expected to generate 179.86 times less return on investment than Donegal Group. But when comparing it to its historical volatility, Global Indemnity PLC is 4.51 times less risky than Donegal Group. It trades about 0.01 of its potential returns per unit of risk. Donegal Group B is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,257  in Donegal Group B on August 24, 2024 and sell it today you would earn a total of  178.00  from holding Donegal Group B or generate 14.16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy86.36%
ValuesDaily Returns

Global Indemnity PLC  vs.  Donegal Group B

 Performance 
       Timeline  
Global Indemnity PLC 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Global Indemnity PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent essential indicators, Global Indemnity demonstrated solid returns over the last few months and may actually be approaching a breakup point.
Donegal Group B 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Donegal Group B are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, Donegal Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Global Indemnity and Donegal Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Global Indemnity and Donegal Group

The main advantage of trading using opposite Global Indemnity and Donegal Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Indemnity 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.
The idea behind Global Indemnity PLC and Donegal Group B pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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