Correlation Between Safety Insurance and Selective Insurance
Can any of the company-specific risk be diversified away by investing in both Safety Insurance 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 Safety Insurance and Selective Insurance 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 Selective Insurance Group, you can compare the effects of market volatilities on Safety Insurance 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 Safety Insurance with a short position of Selective Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Safety Insurance and Selective Insurance.
Diversification Opportunities for Safety Insurance and Selective Insurance
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Safety and Selective is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Safety Insurance Group and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance 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 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 Safety Insurance i.e., Safety Insurance and Selective Insurance go up and down completely randomly.
Pair Corralation between Safety Insurance and Selective Insurance
Given the investment horizon of 90 days Safety Insurance Group is expected to generate 1.33 times more return on investment than Selective Insurance. However, Safety Insurance is 1.33 times more volatile than Selective Insurance Group. It trades about 0.14 of its potential returns per unit of risk. Selective Insurance Group is currently generating about 0.18 per unit of risk. If you would invest 7,919 in Safety Insurance Group on August 27, 2024 and sell it today you would earn a total of 567.00 from holding Safety Insurance Group or generate 7.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Safety Insurance Group vs. Selective Insurance Group
Performance |
| Timeline |
| Safety Insurance |
| Selective Insurance |
Safety Insurance and Selective Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Safety Insurance and Selective Insurance
The main advantage of trading using opposite Safety Insurance and Selective Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safety Insurance 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.| Safety Insurance vs. Selective Insurance Group | Safety Insurance vs. Kemper | Safety Insurance vs. Donegal Group B | Safety Insurance vs. Argo Group International |
| Selective Insurance vs. Kemper | Selective Insurance vs. Donegal Group B | Selective Insurance vs. Argo Group International | Selective Insurance vs. Global Indemnity PLC |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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