Correlation Between CNA Financial and Chubb

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

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

Diversification Opportunities for CNA Financial and Chubb

0.37

Correlation Coefficient

CNA Financial  Chubb

Weak diversification

The 3 months correlation between CNA and Chubb is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding CNA Financial and Chubb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chubb and CNA Financial 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 CNA Financial are associated (or correlated) with Chubb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chubb has no effect on the direction of CNA Financial i.e., CNA Financial and Chubb go up and down completely randomly.

Pair Corralation between CNA Financial and Chubb

Considering the 90-day investment horizon CNA Financial is expected to generate 1.57 times more return on investment than Chubb. However, CNA Financial is 1.57 times more volatile than Chubb. It trades about 0.3 of its potential returns per unit of risk. Chubb is currently generating about 0.27 per unit of risk. If you would invest  4,708  in CNA Financial on September 2, 2024 and sell it today you would earn a total of  336.00  from holding CNA Financial or generate 7.14% return on investment over 90 days.

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

CNA Financial  vs.  Chubb

CNA Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CNA Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CNA Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Chubb

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chubb are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Chubb is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CNA Financial and Chubb

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

The idea behind CNA Financial and Chubb 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.