Correlation Between North American and Reinsurance Group
Can any of the company-specific risk be diversified away by investing in both North American and Reinsurance 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 North American and Reinsurance Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and Reinsurance Group of, you can compare the effects of market volatilities on North American and Reinsurance 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 North American with a short position of Reinsurance Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and Reinsurance Group.
Diversification Opportunities for North American and Reinsurance Group
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between North and Reinsurance is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and Reinsurance Group of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reinsurance Group and North American 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 North American Construction are associated (or correlated) with Reinsurance Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reinsurance Group has no effect on the direction of North American i.e., North American and Reinsurance Group go up and down completely randomly.
Pair Corralation between North American and Reinsurance Group
Assuming the 90 days horizon North American Construction is expected to generate 1.96 times more return on investment than Reinsurance Group. However, North American is 1.96 times more volatile than Reinsurance Group of. It trades about 0.16 of its potential returns per unit of risk. Reinsurance Group of is currently generating about -0.39 per unit of risk. If you would invest 1,778 in North American Construction on September 22, 2024 and sell it today you would earn a total of 162.00 from holding North American Construction or generate 9.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Construction vs. Reinsurance Group of
Performance |
| Timeline |
| North American Const |
| Reinsurance Group |
North American and Reinsurance Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and Reinsurance Group
The main advantage of trading using opposite North American and Reinsurance Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American position performs unexpectedly, Reinsurance 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 Reinsurance Group will offset losses from the drop in Reinsurance Group's long position.| North American vs. Schlumberger Limited | North American vs. Halliburton | North American vs. Halliburton | North American vs. Baker Hughes Co |
| Reinsurance Group vs. AUST AGRICULTURAL | Reinsurance Group vs. Hanison Construction Holdings | Reinsurance Group vs. North American Construction | Reinsurance Group vs. GREENX METALS LTD |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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