Correlation Between Heritage Insurance and Root

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

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

Diversification Opportunities for Heritage Insurance and Root

0.39

Correlation Coefficient

Heritage Insurance  Root

Weak diversification

The 3 months correlation between Heritage and Root is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Insurance Hldgs and Root Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Root Inc and Heritage Insurance 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 Heritage Insurance Hldgs 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 Heritage Insurance i.e., Heritage Insurance and Root go up and down completely randomly.

Pair Corralation between Heritage Insurance and Root

Given the investment horizon of 90 days Heritage Insurance is expected to generate 4.63 times less return on investment than Root. But when comparing it to its historical volatility, Heritage Insurance Hldgs is 1.96 times less risky than Root. It trades about 0.1 of its potential returns per unit of risk. Root Inc is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  7,322  in Root Inc on December 20, 2024 and sell it today you would earn a total of  7,942  from holding Root Inc or generate 108.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Heritage Insurance Hldgs  vs.  Root Inc

Heritage Insurance Hldgs

Risk-Adjusted Performance

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.

Root Inc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Root Inc are ranked lower than 18 (%) 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 Heritage Insurance and Root

The main advantage of trading using opposite Heritage Insurance and Root positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heritage Insurance 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 Heritage Insurance Hldgs 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.