Correlation Between RLI Corp and CNA Financial
Can any of the company-specific risk be diversified away by investing in both RLI Corp and CNA Financial 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 RLI Corp and CNA Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RLI Corp and CNA Financial, you can compare the effects of market volatilities on RLI Corp and CNA Financial 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 RLI Corp with a short position of CNA Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLI Corp and CNA Financial.
Diversification Opportunities for RLI Corp and CNA Financial
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between RLI and CNA is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding RLI Corp and CNA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNA Financial and RLI Corp 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 RLI Corp are associated (or correlated) with CNA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNA Financial has no effect on the direction of RLI Corp i.e., RLI Corp and CNA Financial go up and down completely randomly.
Pair Corralation between RLI Corp and CNA Financial
Considering the 90-day investment horizon RLI Corp is expected to generate 1.08 times more return on investment than CNA Financial. However, RLI Corp is 1.08 times more volatile than CNA Financial. It trades about 0.53 of its potential returns per unit of risk. CNA Financial is currently generating about 0.18 per unit of risk. If you would invest 15,597 in RLI Corp on August 30, 2024 and sell it today you would earn a total of 2,427 from holding RLI Corp or generate 15.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RLI Corp vs. CNA Financial
Performance |
| Timeline |
| RLI Corp |
| CNA Financial |
RLI Corp and CNA Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLI Corp and CNA Financial
The main advantage of trading using opposite RLI Corp and CNA Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLI Corp position performs unexpectedly, CNA Financial 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 CNA Financial will offset losses from the drop in CNA Financial's long position.| RLI Corp vs. Argo Group International | RLI Corp vs. Donegal Group A | RLI Corp vs. Selective Insurance Group |
| CNA Financial vs. Argo Group International | CNA Financial vs. Donegal Group A | CNA Financial vs. Selective Insurance Group |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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