Correlation Between NYSE Composite and Selective Insurance
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and Selective Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Selective Insurance Group, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of Selective Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Selective Insurance.
Diversification Opportunities for NYSE Composite and Selective Insurance
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and Selective is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance and NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and Selective Insurance go up and down completely randomly.
Pair Corralation between NYSE Composite and Selective Insurance
Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.4 times less return on investment than Selective Insurance. But when comparing it to its historical volatility, NYSE Composite is 2.89 times less risky than Selective Insurance. It trades about 0.24 of its potential returns per unit of risk. Selective Insurance Group is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 9,122 in Selective Insurance Group on August 28, 2024 and sell it today you would earn a total of 743.00 from holding Selective Insurance Group or generate 8.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Selective Insurance Group
Performance |
| Timeline |
NYSE Composite and Selective Insurance Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Selective Insurance Group
Pair trading matchups for Selective Insurance
Pair Trading with NYSE Composite and Selective Insurance
The main advantage of trading using opposite NYSE Composite and Selective Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Vita Coco | NYSE Composite vs. Franklin Wireless Corp | NYSE Composite vs. Ambev SA ADR | NYSE Composite vs. Toro Co |
| Selective Insurance vs. Kemper | Selective Insurance vs. Donegal Group B | Selective Insurance vs. Argo Group International | Selective Insurance 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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