Correlation Between Selective Insurance and HCI
Can any of the company-specific risk be diversified away by investing in both Selective Insurance and HCI 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 HCI 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 HCI Group, you can compare the effects of market volatilities on Selective Insurance and HCI 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 HCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Selective Insurance and HCI.
Diversification Opportunities for Selective Insurance and HCI
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Selective and HCI is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Selective Insurance Group and HCI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCI Group 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 HCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCI Group has no effect on the direction of Selective Insurance i.e., Selective Insurance and HCI go up and down completely randomly.
Pair Corralation between Selective Insurance and HCI
Assuming the 90 days horizon Selective Insurance Group is expected to under-perform the HCI. But the preferred stock apears to be less risky and, when comparing its historical volatility, Selective Insurance Group is 2.19 times less risky than HCI. The preferred stock trades about -0.12 of its potential returns per unit of risk. The HCI Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 11,479 in HCI Group on August 31, 2024 and sell it today you would earn a total of 192.00 from holding HCI Group or generate 1.67% 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. HCI Group
Performance |
| Timeline |
| Selective Insurance |
| HCI Group |
Selective Insurance and HCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Selective Insurance and HCI
The main advantage of trading using opposite Selective Insurance and HCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Selective Insurance position performs unexpectedly, HCI 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 HCI will offset losses from the drop in HCI's long position.| Selective Insurance vs. Brighthouse Financial | Selective Insurance vs. First Citizens BancShares | Selective Insurance vs. Northern Trust | Selective Insurance vs. Dime Community Bancshares |
| HCI vs. Universal Insurance Holdings | HCI vs. Kingstone Companies | HCI vs. Horace Mann Educators | HCI vs. Heritage Insurance Hldgs |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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