Correlation Between Donegal Group and Conifer Holding

Can any of the company-specific risk be diversified away by investing in both Donegal Group and Conifer Holding 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 Conifer Holding 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 Conifer Holding, you can compare the effects of market volatilities on Donegal Group and Conifer Holding 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 Conifer Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Donegal Group and Conifer Holding.

Diversification Opportunities for Donegal Group and Conifer Holding

0.05

Correlation Coefficient

Donegal Group  Conifer Holding

Significant diversification

The 3 months correlation between Donegal and Conifer is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Donegal Group B and Conifer Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conifer Holding 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 Conifer Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conifer Holding has no effect on the direction of Donegal Group i.e., Donegal Group and Conifer Holding go up and down completely randomly.

Pair Corralation between Donegal Group and Conifer Holding

Assuming the 90 days horizon Donegal Group B is expected to generate 1.13 times more return on investment than Conifer Holding. However, Donegal Group is 1.13 times more volatile than Conifer Holding. It trades about -0.04 of its potential returns per unit of risk. Conifer Holding is currently generating about -0.1 per unit of risk. If you would invest  1,460  in Donegal Group B on October 10, 2024 and sell it today you would lose (48.00) from holding Donegal Group B or give up 3.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	80.95%
Values	Daily Returns

Donegal Group B  vs.  Conifer Holding

Donegal Group B

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Donegal Group B are ranked lower than 5 (%) 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.

Conifer Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Conifer Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Conifer Holding is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Donegal Group and Conifer Holding

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

The idea behind Donegal Group B and Conifer Holding 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.