Correlation Between Hallmark Financial and Root

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

Diversification Opportunities for Hallmark Financial and Root

-0.65

Correlation Coefficient

Hallmark Financial  Root

Excellent diversification

The 3 months correlation between Hallmark and Root is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Hallmark Financial Services and Root Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Root Inc 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 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 Hallmark Financial i.e., Hallmark Financial and Root go up and down completely randomly.

Pair Corralation between Hallmark Financial and Root

Given the investment horizon of 90 days Hallmark Financial Services is expected to under-perform the Root. But the pink sheet apears to be less risky and, when comparing its historical volatility, Hallmark Financial Services is 1.32 times less risky than Root. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Root Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  612.00  in Root Inc on October 23, 2024 and sell it today you would earn a total of  7,448  from holding Root Inc or generate 1216.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	24.24%
Values	Daily Returns

Hallmark Financial Services  vs.  Root Inc

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.

Root Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Root Inc are ranked lower than 13 (%) 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 Hallmark Financial and Root

The main advantage of trading using opposite Hallmark Financial and Root positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hallmark Financial 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 Hallmark Financial Services 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.