Correlation Between Pembina Pipeline and Selective Insurance
Can any of the company-specific risk be diversified away by investing in both Pembina Pipeline 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 Pembina Pipeline and Selective Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pembina Pipeline Corp and Selective Insurance Group, you can compare the effects of market volatilities on Pembina Pipeline 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 Pembina Pipeline with a short position of Selective Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pembina Pipeline and Selective Insurance.
Diversification Opportunities for Pembina Pipeline and Selective Insurance
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pembina and Selective is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Pembina Pipeline Corp and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance and Pembina Pipeline 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 Pembina Pipeline Corp 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 Pembina Pipeline i.e., Pembina Pipeline and Selective Insurance go up and down completely randomly.
Pair Corralation between Pembina Pipeline and Selective Insurance
Assuming the 90 days horizon Pembina Pipeline is expected to generate 3.1 times less return on investment than Selective Insurance. But when comparing it to its historical volatility, Pembina Pipeline Corp is 1.44 times less risky than Selective Insurance. It trades about 0.08 of its potential returns per unit of risk. Selective Insurance Group is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 8,416 in Selective Insurance Group on August 29, 2024 and sell it today you would earn a total of 684.00 from holding Selective Insurance Group or generate 8.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pembina Pipeline Corp vs. Selective Insurance Group
Performance |
| Timeline |
| Pembina Pipeline Corp |
| Selective Insurance |
Pembina Pipeline and Selective Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pembina Pipeline and Selective Insurance
The main advantage of trading using opposite Pembina Pipeline and Selective Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pembina Pipeline 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.| Pembina Pipeline vs. Enbridge | Pembina Pipeline vs. Kinder Morgan | Pembina Pipeline vs. Targa Resources Corp |
| Selective Insurance vs. PICC Property and | Selective Insurance vs. QBE Insurance Group | Selective Insurance vs. Superior Plus Corp | Selective Insurance vs. SIVERS SEMICONDUCTORS AB |
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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