Correlation Between Everest and RenaissanceRe Holdings

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

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

Diversification Opportunities for Everest and RenaissanceRe Holdings

0.62

Correlation Coefficient

Everest  RenaissanceRe Holdings

Poor diversification

The 3 months correlation between Everest and RenaissanceRe is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Everest Group and RenaissanceRe Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RenaissanceRe Holdings and Everest 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 Everest Group are associated (or correlated) with RenaissanceRe Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RenaissanceRe Holdings has no effect on the direction of Everest i.e., Everest and RenaissanceRe Holdings go up and down completely randomly.

Pair Corralation between Everest and RenaissanceRe Holdings

Assuming the 90 days horizon Everest is expected to generate 1.68 times less return on investment than RenaissanceRe Holdings. But when comparing it to its historical volatility, Everest Group is 1.06 times less risky than RenaissanceRe Holdings. It trades about 0.03 of its potential returns per unit of risk. RenaissanceRe Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  17,236  in RenaissanceRe Holdings on October 12, 2024 and sell it today you would earn a total of  7,164  from holding RenaissanceRe Holdings or generate 41.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Everest Group  vs.  RenaissanceRe Holdings

Everest Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

RenaissanceRe Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Everest and RenaissanceRe Holdings

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

The idea behind Everest Group and RenaissanceRe Holdings 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.