Correlation Between Sompo Holdings and RLI Corp
Can any of the company-specific risk be diversified away by investing in both Sompo Holdings and RLI Corp 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 Sompo Holdings and RLI Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sompo Holdings and RLI Corp, you can compare the effects of market volatilities on Sompo Holdings and RLI Corp 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 Sompo Holdings with a short position of RLI Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sompo Holdings and RLI Corp.
Diversification Opportunities for Sompo Holdings and RLI Corp
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sompo and RLI is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Sompo Holdings and RLI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RLI Corp and Sompo Holdings 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 Sompo Holdings are associated (or correlated) with RLI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RLI Corp has no effect on the direction of Sompo Holdings i.e., Sompo Holdings and RLI Corp go up and down completely randomly.
Pair Corralation between Sompo Holdings and RLI Corp
Assuming the 90 days horizon Sompo Holdings is expected to generate 36.27 times more return on investment than RLI Corp. However, Sompo Holdings is 36.27 times more volatile than RLI Corp. It trades about 0.13 of its potential returns per unit of risk. RLI Corp is currently generating about 0.04 per unit of risk. If you would invest 4,065 in Sompo Holdings on September 12, 2024 and sell it today you would lose (1,562) from holding Sompo Holdings or give up 38.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 65.86% |
| Values | Daily Returns |
Sompo Holdings vs. RLI Corp
Performance |
| Timeline |
| Sompo Holdings |
| RLI Corp |
Sompo Holdings and RLI Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sompo Holdings and RLI Corp
The main advantage of trading using opposite Sompo Holdings and RLI Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sompo Holdings position performs unexpectedly, RLI Corp 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 RLI Corp will offset losses from the drop in RLI Corp's long position.| Sompo Holdings vs. Progressive Corp | Sompo Holdings vs. White Mountains Insurance | Sompo Holdings vs. Chubb | Sompo Holdings vs. W R Berkley |
| RLI Corp vs. Horace Mann Educators | RLI Corp vs. Kemper | RLI Corp vs. Global Indemnity PLC | RLI Corp vs. Argo Group International |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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