Correlation Between Lancashire Holdings and Ryan Specialty

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

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

Diversification Opportunities for Lancashire Holdings and Ryan Specialty

-0.3

Correlation Coefficient

Lancashire Holdings  Ryan Specialty

Very good diversification

The 3 months correlation between Lancashire and Ryan is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Lancashire Holdings and Ryan Specialty Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ryan Specialty Group and Lancashire Holdings 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 Lancashire Holdings are associated (or correlated) with Ryan Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ryan Specialty Group has no effect on the direction of Lancashire Holdings i.e., Lancashire Holdings and Ryan Specialty go up and down completely randomly.

Pair Corralation between Lancashire Holdings and Ryan Specialty

Assuming the 90 days horizon Lancashire Holdings is expected to generate 2.06 times more return on investment than Ryan Specialty. However, Lancashire Holdings is 2.06 times more volatile than Ryan Specialty Group. It trades about 0.01 of its potential returns per unit of risk. Ryan Specialty Group is currently generating about -0.03 per unit of risk. If you would invest  850.00  in Lancashire Holdings on September 30, 2024 and sell it today you would lose (19.00) from holding Lancashire Holdings or give up 2.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Lancashire Holdings  vs.  Ryan Specialty Group

Lancashire Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lancashire Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Lancashire Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Ryan Specialty Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ryan Specialty Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Ryan Specialty is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Lancashire Holdings and Ryan Specialty

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

The idea behind Lancashire Holdings and Ryan Specialty Group 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.