Correlation Between Kingstone Companies and Donegal Group

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

By analyzing existing cross correlation between Kingstone Companies and Donegal Group B, you can compare the effects of market volatilities on Kingstone Companies and Donegal Group 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 Kingstone Companies with a short position of Donegal Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kingstone Companies and Donegal Group.

Diversification Opportunities for Kingstone Companies and Donegal Group

-0.4

Correlation Coefficient

Kingstone Companies  Donegal Group

Very good diversification

The 3 months correlation between Kingstone and Donegal is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Kingstone Companies and Donegal Group B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Donegal Group B and Kingstone Companies 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 Kingstone Companies are associated (or correlated) with Donegal Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Donegal Group B has no effect on the direction of Kingstone Companies i.e., Kingstone Companies and Donegal Group go up and down completely randomly.

Pair Corralation between Kingstone Companies and Donegal Group

Given the investment horizon of 90 days Kingstone Companies is expected to generate 1.4 times more return on investment than Donegal Group. However, Kingstone Companies is 1.4 times more volatile than Donegal Group B. It trades about 0.04 of its potential returns per unit of risk. Donegal Group B is currently generating about -0.01 per unit of risk. If you would invest  1,506  in Kingstone Companies on December 21, 2024 and sell it today you would earn a total of  77.00  from holding Kingstone Companies or generate 5.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	75.0%
Values	Daily Returns

Kingstone Companies  vs.  Donegal Group B

Kingstone Companies

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kingstone Companies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Kingstone Companies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Donegal Group B

Risk-Adjusted Performance

Very Weak

Over the last 90 days Donegal Group B has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Donegal Group is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kingstone Companies and Donegal Group

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

The idea behind Kingstone Companies and Donegal Group B 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.