Correlation Between Whirlpool and Selective Insurance
Can any of the company-specific risk be diversified away by investing in both Whirlpool 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 Whirlpool and Selective Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Whirlpool and Selective Insurance Group, you can compare the effects of market volatilities on Whirlpool 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 Whirlpool with a short position of Selective Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Whirlpool and Selective Insurance.
Diversification Opportunities for Whirlpool and Selective Insurance
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Whirlpool and Selective is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Whirlpool and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance and Whirlpool 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 Whirlpool 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 Whirlpool i.e., Whirlpool and Selective Insurance go up and down completely randomly.
Pair Corralation between Whirlpool and Selective Insurance
Assuming the 90 days horizon Whirlpool is expected to generate 2.5 times more return on investment than Selective Insurance. However, Whirlpool is 2.5 times more volatile than Selective Insurance Group. It trades about 0.19 of its potential returns per unit of risk. Selective Insurance Group is currently generating about -0.09 per unit of risk. 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 |
Whirlpool vs. Selective Insurance Group
Performance |
| Timeline |
| Whirlpool |
| Selective Insurance |
Whirlpool and Selective Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Whirlpool and Selective Insurance
The main advantage of trading using opposite Whirlpool and Selective Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Whirlpool 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.| Whirlpool vs. Selective Insurance Group | Whirlpool vs. GRIFFIN MINING LTD | Whirlpool vs. Perseus Mining Limited | Whirlpool vs. HANOVER INSURANCE |
| 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 |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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