Correlation Between Chubb and NI Holdings

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

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

Diversification Opportunities for Chubb and NI Holdings

-0.48

Correlation Coefficient

Chubb  NI Holdings

Very good diversification

The 3 months correlation between Chubb and NODK is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Chubb and NI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NI Holdings 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 NI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NI Holdings has no effect on the direction of Chubb i.e., Chubb and NI Holdings go up and down completely randomly.

Pair Corralation between Chubb and NI Holdings

Allowing for the 90-day total investment horizon Chubb is expected to generate 0.87 times more return on investment than NI Holdings. However, Chubb is 1.15 times less risky than NI Holdings. It trades about 0.09 of its potential returns per unit of risk. NI Holdings is currently generating about -0.11 per unit of risk. If you would invest  27,680  in Chubb on December 27, 2024 and sell it today you would earn a total of  1,852  from holding Chubb or generate 6.69% return on investment over 90 days.

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

Chubb  vs.  NI Holdings

Chubb

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chubb are ranked lower than 6 (%) 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.

NI Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days NI Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Chubb and NI Holdings

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

The idea behind Chubb and NI Holdings 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.