Correlation Between Chubb and Donegal Group

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

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

Diversification Opportunities for Chubb and Donegal Group

0.61

Correlation Coefficient

Chubb  Donegal Group

Poor diversification

The 3 months correlation between Chubb and Donegal is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Chubb and Donegal Group B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Donegal Group B and Chubb 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 Chubb are associated (or correlated) with Donegal Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Donegal Group B has no effect on the direction of Chubb i.e., Chubb and Donegal Group go up and down completely randomly.

Pair Corralation between Chubb and Donegal Group

Allowing for the 90-day total investment horizon Chubb is expected to generate 2.25 times less return on investment than Donegal Group. But when comparing it to its historical volatility, Chubb is 2.89 times less risky than Donegal Group. It trades about 0.1 of its potential returns per unit of risk. Donegal Group B is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,477  in Donegal Group B on December 28, 2024 and sell it today you would earn a total of  178.00  from holding Donegal Group B or generate 12.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	80.33%
Values	Daily Returns

Chubb  vs.  Donegal Group B

Chubb

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chubb are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Chubb may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Donegal Group B

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Donegal Group B are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, Donegal Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chubb and Donegal Group

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

The idea behind Chubb and Donegal Group B 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.