Correlation Between Donegal Group and Chubb

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

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

Diversification Opportunities for Donegal Group and Chubb

-0.27

Correlation Coefficient

Donegal Group  Chubb

Very good diversification

The 3 months correlation between Donegal and Chubb is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Donegal Group B and Chubb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chubb 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 B 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 Donegal Group i.e., Donegal Group and Chubb go up and down completely randomly.

Pair Corralation between Donegal Group and Chubb

Assuming the 90 days horizon Donegal Group B is expected to generate 2.96 times more return on investment than Chubb. However, Donegal Group is 2.96 times more volatile than Chubb. It trades about 0.09 of its potential returns per unit of risk. Chubb is currently generating about 0.02 per unit of risk. If you would invest  1,271  in Donegal Group B on September 2, 2024 and sell it today you would earn a total of  180.00  from holding Donegal Group B or generate 14.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	84.38%
Values	Daily Returns

Donegal Group B  vs.  Chubb

Donegal Group B

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Donegal Group B are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, Donegal Group sustained solid returns over the last few months and may actually be approaching a breakup point.

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 Donegal Group and Chubb

The main advantage of trading using opposite Donegal Group and Chubb positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Donegal Group 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 Donegal Group B 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.