Correlation Between White Mountains and Mercury General
Can any of the company-specific risk be diversified away by investing in both White Mountains and Mercury General 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 White Mountains and Mercury General into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between White Mountains Insurance and Mercury General, you can compare the effects of market volatilities on White Mountains and Mercury General 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 White Mountains with a short position of Mercury General. Check out your portfolio center. Please also check ongoing floating volatility patterns of White Mountains and Mercury General.
Diversification Opportunities for White Mountains and Mercury General
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between White and Mercury is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding White Mountains Insurance and Mercury General in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mercury General and White Mountains 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 White Mountains Insurance are associated (or correlated) with Mercury General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mercury General has no effect on the direction of White Mountains i.e., White Mountains and Mercury General go up and down completely randomly.
Pair Corralation between White Mountains and Mercury General
Considering the 90-day investment horizon White Mountains is expected to generate 1.47 times less return on investment than Mercury General. But when comparing it to its historical volatility, White Mountains Insurance is 1.72 times less risky than Mercury General. It trades about 0.28 of its potential returns per unit of risk. Mercury General is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 6,784 in Mercury General on August 27, 2024 and sell it today you would earn a total of 943.00 from holding Mercury General or generate 13.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
White Mountains Insurance vs. Mercury General
Performance |
| Timeline |
| White Mountains Insurance |
| Mercury General |
White Mountains and Mercury General Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with White Mountains and Mercury General
The main advantage of trading using opposite White Mountains and Mercury General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if White Mountains position performs unexpectedly, Mercury General 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 Mercury General will offset losses from the drop in Mercury General's long position.| White Mountains vs. NI Holdings | White Mountains vs. Donegal Group A | White Mountains vs. Donegal Group B | White Mountains vs. The Hanover Insurance |
| Mercury General vs. Selective Insurance Group | Mercury General vs. Kemper | Mercury General vs. Donegal Group B | Mercury General vs. Argo Group International |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities |