Correlation Between CorVel Corp and Erie Indemnity

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

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

Diversification Opportunities for CorVel Corp and Erie Indemnity

-0.34

Correlation Coefficient

CorVel Corp  Erie Indemnity

Very good diversification

The 3 months correlation between CorVel and Erie is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding CorVel Corp and Erie Indemnity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erie Indemnity and CorVel Corp 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 CorVel Corp are associated (or correlated) with Erie Indemnity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erie Indemnity has no effect on the direction of CorVel Corp i.e., CorVel Corp and Erie Indemnity go up and down completely randomly.

Pair Corralation between CorVel Corp and Erie Indemnity

Given the investment horizon of 90 days CorVel Corp is expected to generate 2.83 times less return on investment than Erie Indemnity. In addition to that, CorVel Corp is 1.1 times more volatile than Erie Indemnity. It trades about 0.01 of its total potential returns per unit of risk. Erie Indemnity is currently generating about 0.03 per unit of volatility. If you would invest  40,999  in Erie Indemnity on December 28, 2024 and sell it today you would earn a total of  956.00  from holding Erie Indemnity or generate 2.33% return on investment over 90 days.

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

CorVel Corp  vs.  Erie Indemnity

CorVel Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days CorVel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, CorVel Corp is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Erie Indemnity

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Erie Indemnity are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Erie Indemnity is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CorVel Corp and Erie Indemnity

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

The idea behind CorVel Corp and Erie Indemnity 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.