Correlation Between Global Indemnity and NI Holdings

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

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

Diversification Opportunities for Global Indemnity and NI Holdings

0.05

Correlation Coefficient

Global Indemnity  NI Holdings

Significant diversification

The 3 months correlation between Global and NODK is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Global Indemnity PLC and NI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NI Holdings and Global 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 Global Indemnity PLC are associated (or correlated) with NI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NI Holdings has no effect on the direction of Global Indemnity i.e., Global Indemnity and NI Holdings go up and down completely randomly.

Pair Corralation between Global Indemnity and NI Holdings

Given the investment horizon of 90 days Global Indemnity PLC is expected to generate 1.36 times more return on investment than NI Holdings. However, Global Indemnity is 1.36 times more volatile than NI Holdings. It trades about -0.02 of its potential returns per unit of risk. NI Holdings is currently generating about -0.1 per unit of risk. If you would invest  3,590  in Global Indemnity PLC on December 28, 2024 and sell it today you would lose (113.00) from holding Global Indemnity PLC or give up 3.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.67%
Values	Daily Returns

Global Indemnity PLC  vs.  NI Holdings

Global Indemnity PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Indemnity PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, Global Indemnity is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

NI Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days NI Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Global Indemnity and NI Holdings

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

The idea behind Global Indemnity PLC and NI 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.