Correlation Between Safety Insurance and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Safety Insurance 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 Safety Insurance and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Safety Insurance Group and Dow Jones Industrial, you can compare the effects of market volatilities on Safety Insurance 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 Safety Insurance with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Safety Insurance and Dow Jones.
Diversification Opportunities for Safety Insurance and Dow Jones
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Safety and Dow is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Safety Insurance Group 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 Safety Insurance 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 Safety Insurance Group 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 Safety Insurance i.e., Safety Insurance and Dow Jones go up and down completely randomly.
Pair Corralation between Safety Insurance and Dow Jones
Given the investment horizon of 90 days Safety Insurance is expected to generate 1.69 times less return on investment than Dow Jones. In addition to that, Safety Insurance is 2.13 times more volatile than Dow Jones Industrial. It trades about 0.03 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.12 per unit of volatility. If you would invest 4,205,219 in Dow Jones Industrial on November 1, 2024 and sell it today you would earn a total of 266,133 from holding Dow Jones Industrial or generate 6.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Safety Insurance Group vs. Dow Jones Industrial
Performance |
| Timeline |
Safety Insurance and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Safety Insurance Group
Pair trading matchups for Safety Insurance
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Safety Insurance and Dow Jones
The main advantage of trading using opposite Safety Insurance and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safety Insurance 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.| Safety Insurance vs. Selective Insurance Group | Safety Insurance vs. Kemper | Safety Insurance vs. Donegal Group B | Safety Insurance vs. Argo Group International |
| Dow Jones vs. WEC Energy Group | Dow Jones vs. Pure Cycle | Dow Jones vs. Tandy Leather Factory | Dow Jones vs. Tapestry |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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