Correlation Between Global Indemnity and Old Republic

Can any of the company-specific risk be diversified away by investing in both Global Indemnity and Old Republic 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 Old Republic 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 Old Republic International, you can compare the effects of market volatilities on Global Indemnity and Old Republic 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 Old Republic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Indemnity and Old Republic.

Diversification Opportunities for Global Indemnity and Old Republic

-0.2

Correlation Coefficient

Global Indemnity  Old Republic

Good diversification

The 3 months correlation between Global and Old is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Global Indemnity PLC and Old Republic International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Republic Interna 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 Old Republic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Republic Interna has no effect on the direction of Global Indemnity i.e., Global Indemnity and Old Republic go up and down completely randomly.

Pair Corralation between Global Indemnity and Old Republic

Given the investment horizon of 90 days Global Indemnity PLC is expected to under-perform the Old Republic. In addition to that, Global Indemnity is 1.76 times more volatile than Old Republic International. It trades about 0.0 of its total potential returns per unit of risk. Old Republic International is currently generating about 0.19 per unit of volatility. If you would invest  3,412  in Old Republic International on December 27, 2024 and sell it today you would earn a total of  493.00  from holding Old Republic International or generate 14.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Global Indemnity PLC  vs.  Old Republic International

Global Indemnity PLC

Risk-Adjusted Performance

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.

Old Republic Interna

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Old Republic International are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Old Republic demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global Indemnity and Old Republic

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

The idea behind Global Indemnity PLC and Old Republic International 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.