Correlation Between Selective Insurance and ProAssurance
Can any of the company-specific risk be diversified away by investing in both Selective Insurance and ProAssurance 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 ProAssurance 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 ProAssurance, you can compare the effects of market volatilities on Selective Insurance and ProAssurance 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 ProAssurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Selective Insurance and ProAssurance.
Diversification Opportunities for Selective Insurance and ProAssurance
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Selective and ProAssurance is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Selective Insurance Group and ProAssurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProAssurance 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 ProAssurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProAssurance has no effect on the direction of Selective Insurance i.e., Selective Insurance and ProAssurance go up and down completely randomly.
Pair Corralation between Selective Insurance and ProAssurance
Given the investment horizon of 90 days Selective Insurance Group is expected to under-perform the ProAssurance. In addition to that, Selective Insurance is 1.44 times more volatile than ProAssurance. It trades about -0.12 of its total potential returns per unit of risk. ProAssurance is currently generating about -0.1 per unit of volatility. If you would invest 1,571 in ProAssurance on November 3, 2024 and sell it today you would lose (75.00) from holding ProAssurance or give up 4.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Selective Insurance Group vs. ProAssurance
Performance |
| Timeline |
| Selective Insurance |
| ProAssurance |
Selective Insurance and ProAssurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Selective Insurance and ProAssurance
The main advantage of trading using opposite Selective Insurance and ProAssurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Selective Insurance position performs unexpectedly, ProAssurance 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 ProAssurance will offset losses from the drop in ProAssurance's long position.| Selective Insurance vs. Kemper | Selective Insurance vs. Donegal Group B | Selective Insurance vs. Argo Group International | Selective Insurance vs. Global Indemnity PLC |
| ProAssurance vs. Argo Group International | ProAssurance vs. Horace Mann Educators | ProAssurance vs. Kemper | ProAssurance vs. Selective Insurance Group |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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