Correlation Between RLI Corp and White Mountains
Can any of the company-specific risk be diversified away by investing in both RLI Corp and White Mountains 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 White Mountains into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RLI Corp and White Mountains Insurance, you can compare the effects of market volatilities on RLI Corp and White Mountains 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 White Mountains. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLI Corp and White Mountains.
Diversification Opportunities for RLI Corp and White Mountains
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between RLI and White is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding RLI Corp and White Mountains Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on White Mountains Insurance 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 White Mountains. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of White Mountains Insurance has no effect on the direction of RLI Corp i.e., RLI Corp and White Mountains go up and down completely randomly.
Pair Corralation between RLI Corp and White Mountains
Considering the 90-day investment horizon RLI Corp is expected to generate 0.79 times more return on investment than White Mountains. However, RLI Corp is 1.26 times less risky than White Mountains. It trades about 0.52 of its potential returns per unit of risk. White Mountains Insurance is currently generating about 0.28 per unit of risk. If you would invest 15,650 in RLI Corp on August 27, 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. White Mountains Insurance
Performance |
| Timeline |
| RLI Corp |
| White Mountains Insurance |
RLI Corp and White Mountains Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLI Corp and White Mountains
The main advantage of trading using opposite RLI Corp and White Mountains positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLI Corp position performs unexpectedly, White Mountains 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 White Mountains will offset losses from the drop in White Mountains' long position.| RLI Corp vs. Horace Mann Educators | RLI Corp vs. Kemper | RLI Corp vs. Global Indemnity PLC | RLI Corp vs. Argo Group International |
| White Mountains vs. NI Holdings | White Mountains vs. Donegal Group A | White Mountains vs. Donegal Group B | White Mountains vs. The Hanover Insurance |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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