Correlation Between Baldwin Insurance and Albertsons Companies

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

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

Diversification Opportunities for Baldwin Insurance and Albertsons Companies

-0.3

Correlation Coefficient

Baldwin Insurance  Albertsons Companies

Very good diversification

The 3 months correlation between Baldwin and Albertsons is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding The Baldwin Insurance and Albertsons Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albertsons Companies and Baldwin Insurance 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 The Baldwin Insurance are associated (or correlated) with Albertsons Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albertsons Companies has no effect on the direction of Baldwin Insurance i.e., Baldwin Insurance and Albertsons Companies go up and down completely randomly.

Pair Corralation between Baldwin Insurance and Albertsons Companies

Given the investment horizon of 90 days The Baldwin Insurance is expected to under-perform the Albertsons Companies. In addition to that, Baldwin Insurance is 2.68 times more volatile than Albertsons Companies. It trades about -0.03 of its total potential returns per unit of risk. Albertsons Companies is currently generating about -0.02 per unit of volatility. If you would invest  1,888  in Albertsons Companies on September 12, 2024 and sell it today you would lose (37.00) from holding Albertsons Companies or give up 1.96% of portfolio value over 90 days.

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

The Baldwin Insurance  vs.  Albertsons Companies

Baldwin Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Baldwin Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Baldwin Insurance is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Albertsons Companies

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Albertsons Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Albertsons Companies is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Baldwin Insurance and Albertsons Companies

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

The idea behind The Baldwin Insurance and Albertsons Companies 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.