Correlation Between Employers Holdings and 33938XAC9

Can any of the company-specific risk be diversified away by investing in both Employers Holdings and 33938XAC9 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 Employers Holdings and 33938XAC9 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Employers Holdings and US33938XAC92, you can compare the effects of market volatilities on Employers Holdings and 33938XAC9 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 Employers Holdings with a short position of 33938XAC9. Check out your portfolio center. Please also check ongoing floating volatility patterns of Employers Holdings and 33938XAC9.

Diversification Opportunities for Employers Holdings and 33938XAC9

-0.26

Correlation Coefficient

Employers Holdings  33938XAC9

Very good diversification

The 3 months correlation between Employers and 33938XAC9 is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Employers Holdings and US33938XAC92 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US33938XAC92 and Employers Holdings 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 Employers Holdings are associated (or correlated) with 33938XAC9. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US33938XAC92 has no effect on the direction of Employers Holdings i.e., Employers Holdings and 33938XAC9 go up and down completely randomly.

Pair Corralation between Employers Holdings and 33938XAC9

Considering the 90-day investment horizon Employers Holdings is expected to generate 2.86 times more return on investment than 33938XAC9. However, Employers Holdings is 2.86 times more volatile than US33938XAC92. It trades about 0.0 of its potential returns per unit of risk. US33938XAC92 is currently generating about -0.05 per unit of risk. If you would invest  5,059  in Employers Holdings on December 30, 2024 and sell it today you would lose (22.00) from holding Employers Holdings or give up 0.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Employers Holdings  vs.  US33938XAC92

Employers Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Employers Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Employers Holdings is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

US33938XAC92

Risk-Adjusted Performance

Very Weak

Over the last 90 days US33938XAC92 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 33938XAC9 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Employers Holdings and 33938XAC9

The main advantage of trading using opposite Employers Holdings and 33938XAC9 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Employers Holdings position performs unexpectedly, 33938XAC9 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 33938XAC9 will offset losses from the drop in 33938XAC9's long position.

The idea behind Employers Holdings and US33938XAC92 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.