Correlation Between W R and ProAssurance
Can any of the company-specific risk be diversified away by investing in both W R and ProAssurance 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 W R and ProAssurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between W R Berkley and ProAssurance, you can compare the effects of market volatilities on W R and ProAssurance 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 W R with a short position of ProAssurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of W R and ProAssurance.
Diversification Opportunities for W R and ProAssurance
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WRB and ProAssurance is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding W R Berkley and ProAssurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProAssurance and W R 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 W R Berkley are associated (or correlated) with ProAssurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProAssurance has no effect on the direction of W R i.e., W R and ProAssurance go up and down completely randomly.
Pair Corralation between W R and ProAssurance
Considering the 90-day investment horizon W R Berkley is expected to generate 0.72 times more return on investment than ProAssurance. However, W R Berkley is 1.38 times less risky than ProAssurance. It trades about 0.05 of its potential returns per unit of risk. ProAssurance is currently generating about -0.1 per unit of risk. If you would invest 5,801 in W R Berkley on November 3, 2024 and sell it today you would earn a total of 82.00 from holding W R Berkley or generate 1.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
W R Berkley vs. ProAssurance
Performance |
| Timeline |
| W R Berkley |
| ProAssurance |
W R and ProAssurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with W R and ProAssurance
The main advantage of trading using opposite W R and ProAssurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if W R position performs unexpectedly, ProAssurance 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 ProAssurance will offset losses from the drop in ProAssurance's long position.The idea behind W R Berkley and ProAssurance pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| ProAssurance vs. Argo Group International | ProAssurance vs. Horace Mann Educators | ProAssurance vs. Kemper | ProAssurance vs. Selective Insurance 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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