Correlation Between Donegal Group and Heritage Insurance

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Can any of the company-specific risk be diversified away by investing in both Donegal Group and Heritage Insurance 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 Donegal Group and Heritage Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Donegal Group A and Heritage Insurance Hldgs, you can compare the effects of market volatilities on Donegal Group and Heritage Insurance 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 Donegal Group with a short position of Heritage Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Donegal Group and Heritage Insurance.

Diversification Opportunities for Donegal Group and Heritage Insurance

-0.03
  Correlation Coefficient

Good diversification

The 3 months correlation between Donegal and Heritage is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Donegal Group A and Heritage Insurance Hldgs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Insurance Hldgs and Donegal Group 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 Donegal Group A are associated (or correlated) with Heritage Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Insurance Hldgs has no effect on the direction of Donegal Group i.e., Donegal Group and Heritage Insurance go up and down completely randomly.

Pair Corralation between Donegal Group and Heritage Insurance

Assuming the 90 days horizon Donegal Group is expected to generate 3.24 times less return on investment than Heritage Insurance. But when comparing it to its historical volatility, Donegal Group A is 2.96 times less risky than Heritage Insurance. It trades about 0.06 of its potential returns per unit of risk. Heritage Insurance Hldgs is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  794.00  in Heritage Insurance Hldgs on September 4, 2024 and sell it today you would earn a total of  442.00  from holding Heritage Insurance Hldgs or generate 55.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Donegal Group A  vs.  Heritage Insurance Hldgs

 Performance 
       Timeline  
Donegal Group A 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Donegal Group A are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental indicators, Donegal Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Heritage Insurance Hldgs 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Heritage Insurance Hldgs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Donegal Group and Heritage Insurance Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Donegal Group and Heritage Insurance

The main advantage of trading using opposite Donegal Group and Heritage Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Donegal Group position performs unexpectedly, Heritage Insurance 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 Heritage Insurance will offset losses from the drop in Heritage Insurance's long position.
The idea behind Donegal Group A and Heritage Insurance Hldgs 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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