Correlation Between Swire Properties and Selective Insurance
Can any of the company-specific risk be diversified away by investing in both Swire Properties and Selective 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 Swire Properties and Selective Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Swire Properties Limited and Selective Insurance Group, you can compare the effects of market volatilities on Swire Properties and Selective 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 Swire Properties with a short position of Selective Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swire Properties and Selective Insurance.
Diversification Opportunities for Swire Properties and Selective Insurance
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Swire and Selective is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Swire Properties Limited and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance and Swire Properties 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 Swire Properties Limited are associated (or correlated) with Selective Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selective Insurance has no effect on the direction of Swire Properties i.e., Swire Properties and Selective Insurance go up and down completely randomly.
Pair Corralation between Swire Properties and Selective Insurance
Assuming the 90 days horizon Swire Properties Limited is expected to under-perform the Selective Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Swire Properties Limited is 1.37 times less risky than Selective Insurance. The stock trades about -0.02 of its potential returns per unit of risk. The Selective Insurance Group is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 8,416 in Selective Insurance Group on September 5, 2024 and sell it today you would earn a total of 934.00 from holding Selective Insurance Group or generate 11.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Swire Properties Limited vs. Selective Insurance Group
Performance |
| Timeline |
| Swire Properties |
| Selective Insurance |
Swire Properties and Selective Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Swire Properties and Selective Insurance
The main advantage of trading using opposite Swire Properties and Selective Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swire Properties position performs unexpectedly, Selective 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 Selective Insurance will offset losses from the drop in Selective Insurance's long position.| Swire Properties vs. Selective Insurance Group | Swire Properties vs. Cardinal Health | Swire Properties vs. National Health Investors | Swire Properties vs. BORR DRILLING NEW |
| Selective Insurance vs. The Allstate | Selective Insurance vs. Fairfax Financial Holdings | Selective Insurance vs. QBE Insurance Group | Selective Insurance vs. Insurance Australia 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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