Correlation Between Chubb and Markel

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

By analyzing existing cross correlation between Chubb and Markel, you can compare the effects of market volatilities on Chubb and Markel 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 Markel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chubb and Markel.

Diversification Opportunities for Chubb and Markel

0.27

Correlation Coefficient

Chubb  Markel

Modest diversification

The 3 months correlation between Chubb and Markel is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Chubb and Markel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Markel 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 Markel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Markel has no effect on the direction of Chubb i.e., Chubb and Markel go up and down completely randomly.

Pair Corralation between Chubb and Markel

Allowing for the 90-day total investment horizon Chubb is expected to generate 1.03 times less return on investment than Markel. But when comparing it to its historical volatility, Chubb is 1.4 times less risky than Markel. It trades about 0.1 of its potential returns per unit of risk. Markel is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  174,035  in Markel on December 27, 2024 and sell it today you would earn a total of  13,121  from holding Markel or generate 7.54% return on investment over 90 days.

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

Chubb  vs.  Markel

Chubb

Risk-Adjusted Performance

Modest

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 fragile fundamental drivers, Chubb may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Markel

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Markel are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Markel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Chubb and Markel

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

The idea behind Chubb and Markel 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.