Correlation Between LION ONE and Selective Insurance
Can any of the company-specific risk be diversified away by investing in both LION ONE and Selective Insurance 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 LION ONE and Selective Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LION ONE METALS and Selective Insurance Group, you can compare the effects of market volatilities on LION ONE and Selective Insurance 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 LION ONE with a short position of Selective Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of LION ONE and Selective Insurance.
Diversification Opportunities for LION ONE and Selective Insurance
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between LION and Selective is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding LION ONE METALS and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance and LION ONE 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 LION ONE METALS are associated (or correlated) with Selective Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selective Insurance has no effect on the direction of LION ONE i.e., LION ONE and Selective Insurance go up and down completely randomly.
Pair Corralation between LION ONE and Selective Insurance
Assuming the 90 days trading horizon LION ONE METALS is expected to under-perform the Selective Insurance. In addition to that, LION ONE is 2.33 times more volatile than Selective Insurance Group. It trades about -0.03 of its total potential returns per unit of risk. Selective Insurance Group is currently generating about 0.01 per unit of volatility. If you would invest 8,690 in Selective Insurance Group on August 25, 2024 and sell it today you would earn a total of 10.00 from holding Selective Insurance Group or generate 0.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LION ONE METALS vs. Selective Insurance Group
Performance |
| Timeline |
| LION ONE METALS |
| Selective Insurance |
LION ONE and Selective Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LION ONE and Selective Insurance
The main advantage of trading using opposite LION ONE and Selective Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LION ONE position performs unexpectedly, Selective Insurance 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 Selective Insurance will offset losses from the drop in Selective Insurance's long position.The idea behind LION ONE METALS and Selective Insurance Group 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.| Selective Insurance vs. Pembina Pipeline Corp | Selective Insurance vs. Merit Medical Systems | Selective Insurance vs. MeVis Medical Solutions | Selective Insurance vs. Clearside Biomedical |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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