Correlation Between Selective Insurance and Whirlpool
Can any of the company-specific risk be diversified away by investing in both Selective Insurance and Whirlpool 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 Whirlpool 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 Whirlpool, you can compare the effects of market volatilities on Selective Insurance and Whirlpool 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 Whirlpool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Selective Insurance and Whirlpool.
Diversification Opportunities for Selective Insurance and Whirlpool
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Selective and Whirlpool is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Selective Insurance Group and Whirlpool in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whirlpool 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 Whirlpool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whirlpool has no effect on the direction of Selective Insurance i.e., Selective Insurance and Whirlpool go up and down completely randomly.
Pair Corralation between Selective Insurance and Whirlpool
Assuming the 90 days horizon Selective Insurance Group is expected to under-perform the Whirlpool. But the stock apears to be less risky and, when comparing its historical volatility, Selective Insurance Group is 2.5 times less risky than Whirlpool. The stock trades about -0.09 of its potential returns per unit of risk. The Whirlpool is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 10,590 in Whirlpool on September 17, 2024 and sell it today you would earn a total of 1,135 from holding Whirlpool or generate 10.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Selective Insurance Group vs. Whirlpool
Performance |
| Timeline |
| Selective Insurance |
| Whirlpool |
Selective Insurance and Whirlpool Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Selective Insurance and Whirlpool
The main advantage of trading using opposite Selective Insurance and Whirlpool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Selective Insurance position performs unexpectedly, Whirlpool 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 Whirlpool will offset losses from the drop in Whirlpool's long position.| Selective Insurance vs. Insurance Australia Group | Selective Insurance vs. Superior Plus Corp | Selective Insurance vs. SIVERS SEMICONDUCTORS AB | Selective Insurance vs. CHINA HUARONG ENERHD 50 |
| Whirlpool vs. Selective Insurance Group | Whirlpool vs. GRIFFIN MINING LTD | Whirlpool vs. Perseus Mining Limited | Whirlpool vs. HANOVER INSURANCE |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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