Correlation Between Stewart Information and Heritage Insurance
Can any of the company-specific risk be diversified away by investing in both Stewart Information and Heritage 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 Stewart Information and Heritage Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stewart Information Services and Heritage Insurance Hldgs, you can compare the effects of market volatilities on Stewart Information and Heritage 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 Stewart Information with a short position of Heritage Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stewart Information and Heritage Insurance.
Diversification Opportunities for Stewart Information and Heritage Insurance
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Stewart and Heritage is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Stewart Information Services and Heritage Insurance Hldgs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Insurance Hldgs and Stewart Information 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 Stewart Information Services are associated (or correlated) with Heritage Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Insurance Hldgs has no effect on the direction of Stewart Information i.e., Stewart Information and Heritage Insurance go up and down completely randomly.
Pair Corralation between Stewart Information and Heritage Insurance
Considering the 90-day investment horizon Stewart Information is expected to generate 1.69 times less return on investment than Heritage Insurance. But when comparing it to its historical volatility, Stewart Information Services is 2.08 times less risky than Heritage Insurance. It trades about 0.28 of its potential returns per unit of risk. Heritage Insurance Hldgs is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,075 in Heritage Insurance Hldgs on August 31, 2024 and sell it today you would earn a total of 161.00 from holding Heritage Insurance Hldgs or generate 14.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stewart Information Services vs. Heritage Insurance Hldgs
Performance |
| Timeline |
| Stewart Information |
| Heritage Insurance Hldgs |
Stewart Information and Heritage Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stewart Information and Heritage Insurance
The main advantage of trading using opposite Stewart Information and Heritage Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stewart Information position performs unexpectedly, Heritage 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 Heritage Insurance will offset losses from the drop in Heritage Insurance's long position.| Stewart Information vs. Selective Insurance Group | Stewart Information vs. Kemper | Stewart Information vs. Donegal Group B | Stewart Information vs. Argo Group International |
| Heritage Insurance vs. Universal Insurance Holdings | Heritage Insurance vs. Donegal Group B | Heritage Insurance vs. Horace Mann Educators | Heritage Insurance vs. NI Holdings |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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