Correlation Between Donegal Group and Horace Mann

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

Diversification Opportunities for Donegal Group and Horace Mann

0.82

Correlation Coefficient

Donegal Group  Horace Mann

Very poor diversification

The 3 months correlation between Donegal and Horace is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Donegal Group B and Horace Mann Educators in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horace Mann Educators 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 Horace Mann. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horace Mann Educators has no effect on the direction of Donegal Group i.e., Donegal Group and Horace Mann go up and down completely randomly.

Pair Corralation between Donegal Group and Horace Mann

Assuming the 90 days horizon Donegal Group B is expected to generate 1.8 times more return on investment than Horace Mann. However, Donegal Group is 1.8 times more volatile than Horace Mann Educators. It trades about 0.1 of its potential returns per unit of risk. Horace Mann Educators is currently generating about 0.15 per unit of risk. If you would invest  1,271  in Donegal Group B on August 30, 2024 and sell it today you would earn a total of  219.00  from holding Donegal Group B or generate 17.23% return on investment over 90 days.

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

Donegal Group B  vs.  Horace Mann Educators

Donegal Group B

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Donegal Group B are ranked lower than 8 (%) 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.

Horace Mann Educators

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Horace Mann Educators are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Horace Mann displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Donegal Group and Horace Mann

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

The idea behind Donegal Group B and Horace Mann Educators 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.