Correlation Between Erie Indemnity and Arthur J

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

By analyzing existing cross correlation between Erie Indemnity and Arthur J Gallagher, you can compare the effects of market volatilities on Erie Indemnity and Arthur J 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 Erie Indemnity with a short position of Arthur J. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erie Indemnity and Arthur J.

Diversification Opportunities for Erie Indemnity and Arthur J

0.35

Correlation Coefficient

Erie Indemnity  Arthur J

Weak diversification

The 3 months correlation between Erie and Arthur is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Erie Indemnity and Arthur J Gallagher in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arthur J Gallagher and Erie Indemnity 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 Erie Indemnity are associated (or correlated) with Arthur J. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arthur J Gallagher has no effect on the direction of Erie Indemnity i.e., Erie Indemnity and Arthur J go up and down completely randomly.

Pair Corralation between Erie Indemnity and Arthur J

Given the investment horizon of 90 days Erie Indemnity is expected to generate 10.11 times less return on investment than Arthur J. In addition to that, Erie Indemnity is 1.61 times more volatile than Arthur J Gallagher. It trades about 0.01 of its total potential returns per unit of risk. Arthur J Gallagher is currently generating about 0.22 per unit of volatility. If you would invest  28,599  in Arthur J Gallagher on December 27, 2024 and sell it today you would earn a total of  5,137  from holding Arthur J Gallagher or generate 17.96% return on investment over 90 days.

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

Erie Indemnity  vs.  Arthur J Gallagher

Erie Indemnity

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Erie Indemnity are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Erie Indemnity is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Arthur J Gallagher

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Arthur J Gallagher are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating forward-looking indicators, Arthur J reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Erie Indemnity and Arthur J

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

The idea behind Erie Indemnity and Arthur J Gallagher 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.