Correlation Between RLI Corp and Dow Jones
Can any of the company-specific risk be diversified away by investing in both RLI Corp and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RLI Corp and Dow Jones Industrial, you can compare the effects of market volatilities on RLI Corp and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLI Corp and Dow Jones.
Diversification Opportunities for RLI Corp and Dow Jones
Very poor diversification
The 3 months correlation between RLI and Dow is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding RLI Corp and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of RLI Corp i.e., RLI Corp and Dow Jones go up and down completely randomly.
Pair Corralation between RLI Corp and Dow Jones
Considering the 90-day investment horizon RLI Corp is expected to generate 1.29 times more return on investment than Dow Jones. However, RLI Corp is 1.29 times more volatile than Dow Jones Industrial. It trades about 0.52 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.26 per unit of risk. If you would invest 15,650 in RLI Corp on August 28, 2024 and sell it today you would earn a total of 2,326 from holding RLI Corp or generate 14.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
RLI Corp vs. Dow Jones Industrial
Performance |
| Timeline |
RLI Corp and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
RLI Corp
Pair trading matchups for RLI Corp
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with RLI Corp and Dow Jones
The main advantage of trading using opposite RLI Corp and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLI Corp position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| RLI Corp vs. Horace Mann Educators | RLI Corp vs. Kemper | RLI Corp vs. Global Indemnity PLC | RLI Corp vs. Argo Group International |
| Dow Jones vs. Meiwu Technology Co | Dow Jones vs. 17 Education Technology | Dow Jones vs. 51Talk Online Education | Dow Jones vs. Afya |
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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