Correlation Between W R and Skyward Specialty
Can any of the company-specific risk be diversified away by investing in both W R and Skyward Specialty 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 Skyward Specialty 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 Skyward Specialty Insurance, you can compare the effects of market volatilities on W R and Skyward Specialty 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 Skyward Specialty. Check out your portfolio center. Please also check ongoing floating volatility patterns of W R and Skyward Specialty.
Diversification Opportunities for W R and Skyward Specialty
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WRB and Skyward is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding W R Berkley and Skyward Specialty Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skyward Specialty 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 Skyward Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skyward Specialty has no effect on the direction of W R i.e., W R and Skyward Specialty go up and down completely randomly.
Pair Corralation between W R and Skyward Specialty
Considering the 90-day investment horizon W R is expected to generate 1.82 times less return on investment than Skyward Specialty. But when comparing it to its historical volatility, W R Berkley is 1.36 times less risky than Skyward Specialty. It trades about 0.27 of its potential returns per unit of risk. Skyward Specialty Insurance is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 4,584 in Skyward Specialty Insurance on August 27, 2024 and sell it today you would earn a total of 683.00 from holding Skyward Specialty Insurance or generate 14.9% 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. Skyward Specialty Insurance
Performance |
| Timeline |
| W R Berkley |
| Skyward Specialty |
W R and Skyward Specialty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with W R and Skyward Specialty
The main advantage of trading using opposite W R and Skyward Specialty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if W R position performs unexpectedly, Skyward Specialty 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 Skyward Specialty will offset losses from the drop in Skyward Specialty's long position.The idea behind W R Berkley and Skyward Specialty Insurance 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.| Skyward Specialty vs. Horace Mann Educators | Skyward Specialty vs. Kemper | Skyward Specialty vs. RLI Corp | Skyward Specialty vs. Global Indemnity PLC |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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