Correlation Between Hallmark Financial and Heritage Insurance

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

By analyzing existing cross correlation between Hallmark Financial Services and Heritage Insurance Hldgs, you can compare the effects of market volatilities on Hallmark Financial and Heritage Insurance 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 Hallmark Financial with a short position of Heritage Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hallmark Financial and Heritage Insurance.

Diversification Opportunities for Hallmark Financial and Heritage Insurance

0.05

Correlation Coefficient

Hallmark Financial  Heritage Insurance

Significant diversification

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

Pair Corralation between Hallmark Financial and Heritage Insurance

If you would invest  533.00  in Hallmark Financial Services on October 8, 2024 and sell it today you would earn a total of  0.00  from holding Hallmark Financial Services or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	5.26%
Values	Daily Returns

Hallmark Financial Services  vs.  Heritage Insurance Hldgs

Hallmark Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hallmark Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Hallmark Financial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Heritage Insurance Hldgs

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heritage Insurance Hldgs are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Heritage Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hallmark Financial and Heritage Insurance

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

The idea behind Hallmark Financial Services and Heritage Insurance Hldgs 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.