Correlation Between Reinsurance Group and Selective Insurance
Can any of the company-specific risk be diversified away by investing in both Reinsurance Group 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 Reinsurance Group and Selective Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reinsurance Group of and Selective Insurance Group, you can compare the effects of market volatilities on Reinsurance Group 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 Reinsurance Group with a short position of Selective Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reinsurance Group and Selective Insurance.
Diversification Opportunities for Reinsurance Group and Selective Insurance
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Reinsurance and Selective is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Reinsurance Group of and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance and Reinsurance Group 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 Reinsurance Group of 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 Reinsurance Group i.e., Reinsurance Group and Selective Insurance go up and down completely randomly.
Pair Corralation between Reinsurance Group and Selective Insurance
Assuming the 90 days trading horizon Reinsurance Group of is expected to generate 1.14 times more return on investment than Selective Insurance. However, Reinsurance Group is 1.14 times more volatile than Selective Insurance Group. It trades about 0.03 of its potential returns per unit of risk. Selective Insurance Group is currently generating about 0.03 per unit of risk. If you would invest 20,214 in Reinsurance Group of on October 26, 2024 and sell it today you would earn a total of 1,186 from holding Reinsurance Group of or generate 5.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Reinsurance Group of vs. Selective Insurance Group
Performance |
| Timeline |
| Reinsurance Group |
| Selective Insurance |
Reinsurance Group and Selective Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reinsurance Group and Selective Insurance
The main advantage of trading using opposite Reinsurance Group and Selective Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reinsurance Group 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.| Reinsurance Group vs. ARISTOCRAT LEISURE | Reinsurance Group vs. Chesapeake Utilities | Reinsurance Group vs. PLAYTECH | Reinsurance Group vs. NORTHEAST UTILITIES |
| Selective Insurance vs. Spirent Communications plc | Selective Insurance vs. Sumitomo Mitsui Construction | Selective Insurance vs. AGRICULTBK HADR25 YC | Selective Insurance vs. ALEFARM BREWING DK 05 |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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