Correlation Between HCI and Skyward Specialty
Can any of the company-specific risk be diversified away by investing in both HCI and Skyward Specialty 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 HCI and Skyward Specialty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HCI Group and Skyward Specialty Insurance, you can compare the effects of market volatilities on HCI and Skyward Specialty 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 HCI with a short position of Skyward Specialty. Check out your portfolio center. Please also check ongoing floating volatility patterns of HCI and Skyward Specialty.
Diversification Opportunities for HCI and Skyward Specialty
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HCI and Skyward is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding HCI Group and Skyward Specialty Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skyward Specialty and HCI 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 HCI Group are associated (or correlated) with Skyward Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skyward Specialty has no effect on the direction of HCI i.e., HCI and Skyward Specialty go up and down completely randomly.
Pair Corralation between HCI and Skyward Specialty
Considering the 90-day investment horizon HCI is expected to generate 3.08 times less return on investment than Skyward Specialty. In addition to that, HCI is 1.27 times more volatile than Skyward Specialty Insurance. It trades about 0.13 of its total potential returns per unit of risk. Skyward Specialty Insurance is currently generating about 0.52 per unit of volatility. If you would invest 4,446 in Skyward Specialty Insurance on August 31, 2024 and sell it today you would earn a total of 965.00 from holding Skyward Specialty Insurance or generate 21.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HCI Group vs. Skyward Specialty Insurance
Performance |
| Timeline |
| HCI Group |
| Skyward Specialty |
HCI and Skyward Specialty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HCI and Skyward Specialty
The main advantage of trading using opposite HCI and Skyward Specialty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HCI position performs unexpectedly, Skyward Specialty 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 Skyward Specialty will offset losses from the drop in Skyward Specialty's long position.| HCI vs. Universal Insurance Holdings | HCI vs. Kingstone Companies | HCI vs. Horace Mann Educators | HCI vs. Heritage Insurance Hldgs |
| Skyward Specialty vs. Horace Mann Educators | Skyward Specialty vs. Kemper | Skyward Specialty vs. RLI Corp | Skyward Specialty vs. Global Indemnity PLC |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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