Correlation Between Global Indemnity and Root

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

Diversification Opportunities for Global Indemnity and Root

0.07

Correlation Coefficient

Global Indemnity  Root

Significant diversification

The 3 months correlation between Global and Root is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Global Indemnity PLC and Root Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Root Inc 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 Root. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Root Inc has no effect on the direction of Global Indemnity i.e., Global Indemnity and Root go up and down completely randomly.

Pair Corralation between Global Indemnity and Root

Given the investment horizon of 90 days Global Indemnity is expected to generate 23.69 times less return on investment than Root. But when comparing it to its historical volatility, Global Indemnity PLC is 3.12 times less risky than Root. It trades about 0.03 of its potential returns per unit of risk. Root Inc is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  7,300  in Root Inc on December 27, 2024 and sell it today you would earn a total of  7,811  from holding Root Inc or generate 107.0% return on investment over 90 days.

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

Global Indemnity PLC  vs.  Root Inc

Global Indemnity PLC

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global Indemnity PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Root Inc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Root Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Root unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global Indemnity and Root

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

The idea behind Global Indemnity PLC and Root Inc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.