Correlation Between Global Indemnity and Skyward Specialty

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

Diversification Opportunities for Global Indemnity and Skyward Specialty

0.84

Correlation Coefficient

Global Indemnity  Skyward Specialty

Very poor diversification

The 3 months correlation between Global and Skyward is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Global Indemnity PLC and Skyward Specialty Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skyward Specialty 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 Skyward Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skyward Specialty has no effect on the direction of Global Indemnity i.e., Global Indemnity and Skyward Specialty go up and down completely randomly.

Pair Corralation between Global Indemnity and Skyward Specialty

Given the investment horizon of 90 days Global Indemnity PLC is expected to generate 26.78 times more return on investment than Skyward Specialty. However, Global Indemnity is 26.78 times more volatile than Skyward Specialty Insurance. It trades about 0.05 of its potential returns per unit of risk. Skyward Specialty Insurance is currently generating about 0.11 per unit of risk. If you would invest  3,181  in Global Indemnity PLC on October 3, 2024 and sell it today you would earn a total of  419.00  from holding Global Indemnity PLC or generate 13.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.13%
Values	Daily Returns

Global Indemnity PLC  vs.  Skyward Specialty Insurance

Global Indemnity PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Indemnity PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent essential indicators, Global Indemnity may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Skyward Specialty

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Global Indemnity and Skyward Specialty

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

The idea behind Global Indemnity PLC and Skyward Specialty Insurance 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.