Correlation Between Argo Group and RLI Corp

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

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

Diversification Opportunities for Argo Group and RLI Corp

-0.72

Correlation Coefficient

Argo Group  RLI Corp

Pay attention - limited upside

The 3 months correlation between Argo and RLI is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Argo Group International and RLI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RLI Corp and Argo Group 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 Argo Group International are associated (or correlated) with RLI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RLI Corp has no effect on the direction of Argo Group i.e., Argo Group and RLI Corp go up and down completely randomly.

Pair Corralation between Argo Group and RLI Corp

Assuming the 90 days trading horizon Argo Group is expected to generate 4.72 times less return on investment than RLI Corp. But when comparing it to its historical volatility, Argo Group International is 10.28 times less risky than RLI Corp. It trades about 0.26 of its potential returns per unit of risk. RLI Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7,268  in RLI Corp on November 28, 2024 and sell it today you would earn a total of  224.00  from holding RLI Corp or generate 3.08% return on investment over 90 days.

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

Argo Group International  vs.  RLI Corp

Argo Group International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Argo Group International are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Argo Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

RLI Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days RLI Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Argo Group and RLI Corp

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

The idea behind Argo Group International and RLI Corp 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.