Correlation Between Selective Insurance and Lemonade
Can any of the company-specific risk be diversified away by investing in both Selective Insurance and Lemonade 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 Selective Insurance and Lemonade into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Selective Insurance Group and Lemonade, you can compare the effects of market volatilities on Selective Insurance and Lemonade 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 Selective Insurance with a short position of Lemonade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Selective Insurance and Lemonade.
Diversification Opportunities for Selective Insurance and Lemonade
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Selective and Lemonade is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Selective Insurance Group and Lemonade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lemonade and Selective 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 Selective Insurance Group are associated (or correlated) with Lemonade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lemonade has no effect on the direction of Selective Insurance i.e., Selective Insurance and Lemonade go up and down completely randomly.
Pair Corralation between Selective Insurance and Lemonade
Given the investment horizon of 90 days Selective Insurance Group is expected to under-perform the Lemonade. But the stock apears to be less risky and, when comparing its historical volatility, Selective Insurance Group is 1.75 times less risky than Lemonade. The stock trades about -0.24 of its potential returns per unit of risk. The Lemonade is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 3,168 in Lemonade on November 27, 2024 and sell it today you would earn a total of 302.00 from holding Lemonade or generate 9.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Selective Insurance Group vs. Lemonade
Performance |
| Timeline |
| Selective Insurance |
| Lemonade |
Selective Insurance and Lemonade Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Selective Insurance and Lemonade
The main advantage of trading using opposite Selective Insurance and Lemonade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Selective Insurance position performs unexpectedly, Lemonade 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 Lemonade will offset losses from the drop in Lemonade's long position.| Selective Insurance vs. Kemper | Selective Insurance vs. Argo Group International | Selective Insurance vs. Global Indemnity PLC | Selective Insurance vs. Horace Mann Educators |
| Lemonade vs. Fiverr International | Lemonade vs. Pinterest | Lemonade vs. Upstart Holdings | Lemonade vs. Fastly Inc |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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