Correlation Between White Mountains and Selective Insurance
Can any of the company-specific risk be diversified away by investing in both White Mountains 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 White Mountains and Selective Insurance 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 Selective Insurance Group, you can compare the effects of market volatilities on White Mountains 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 White Mountains with a short position of Selective Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of White Mountains and Selective Insurance.
Diversification Opportunities for White Mountains and Selective Insurance
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between White and Selective is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding White Mountains Insurance and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance 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 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 White Mountains i.e., White Mountains and Selective Insurance go up and down completely randomly.
Pair Corralation between White Mountains and Selective Insurance
Considering the 90-day investment horizon White Mountains Insurance is expected to generate 0.91 times more return on investment than Selective Insurance. However, White Mountains Insurance is 1.1 times less risky than Selective Insurance. It trades about 0.06 of its potential returns per unit of risk. Selective Insurance Group is currently generating about 0.03 per unit of risk. If you would invest 140,528 in White Mountains Insurance on August 31, 2024 and sell it today you would earn a total of 60,823 from holding White Mountains Insurance or generate 43.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.79% |
| Values | Daily Returns |
White Mountains Insurance vs. Selective Insurance Group
Performance |
| Timeline |
| White Mountains Insurance |
| Selective Insurance |
White Mountains and Selective Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with White Mountains and Selective Insurance
The main advantage of trading using opposite White Mountains and Selective Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if White Mountains 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.| White Mountains vs. NI Holdings | White Mountains vs. Donegal Group A | White Mountains vs. Donegal Group B | White Mountains vs. The Hanover Insurance |
| Selective Insurance vs. Progressive Corp | Selective Insurance vs. Chubb | Selective Insurance vs. The Allstate | Selective Insurance vs. CNA Financial |
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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