Correlation Between FedNat Holding and Lemonade

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

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

Diversification Opportunities for FedNat Holding and Lemonade

0.0

Correlation Coefficient

FedNat Holding  Lemonade

Pay attention - limited upside

The 3 months correlation between FedNat and Lemonade is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding FedNat Holding and Lemonade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lemonade and FedNat Holding 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 FedNat Holding are associated (or correlated) with Lemonade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lemonade has no effect on the direction of FedNat Holding i.e., FedNat Holding and Lemonade go up and down completely randomly.

Pair Corralation between FedNat Holding and Lemonade

If you would invest  1,864  in Lemonade on October 26, 2024 and sell it today you would earn a total of  1,347  from holding Lemonade or generate 72.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

FedNat Holding  vs.  Lemonade

FedNat Holding

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lemonade

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lemonade are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Lemonade exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FedNat Holding and Lemonade

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

The idea behind FedNat Holding and Lemonade 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.