Correlation Between Assurant and Lemonade

Can any of the company-specific risk be diversified away by investing in both Assurant and Lemonade 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 Assurant and Lemonade into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Assurant and Lemonade, you can compare the effects of market volatilities on Assurant and Lemonade 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 Assurant with a short position of Lemonade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Assurant and Lemonade.

Diversification Opportunities for Assurant and Lemonade

-0.15

Correlation Coefficient

Assurant  Lemonade

Good diversification

The 3 months correlation between Assurant and Lemonade is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Assurant and Lemonade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lemonade and Assurant 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 Assurant are associated (or correlated) with Lemonade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lemonade has no effect on the direction of Assurant i.e., Assurant and Lemonade go up and down completely randomly.

Pair Corralation between Assurant and Lemonade

Considering the 90-day investment horizon Assurant is expected to generate 0.28 times more return on investment than Lemonade. However, Assurant is 3.62 times less risky than Lemonade. It trades about -0.02 of its potential returns per unit of risk. Lemonade is currently generating about -0.03 per unit of risk. If you would invest  21,148  in Assurant on December 29, 2024 and sell it today you would lose (517.00) from holding Assurant or give up 2.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Assurant  vs.  Lemonade

Assurant

Risk-Adjusted Performance

Very Weak

Over the last 90 days Assurant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Assurant is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Lemonade

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lemonade has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Assurant and Lemonade

The main advantage of trading using opposite Assurant and Lemonade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Assurant position performs unexpectedly, Lemonade 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 Lemonade will offset losses from the drop in Lemonade's long position.

The idea behind Assurant and Lemonade 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.

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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.