Correlation Between Lemonade and FedNat Holding

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

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

Diversification Opportunities for Lemonade and FedNat Holding

0.0

Correlation Coefficient

Lemonade  FedNat Holding

Pay attention - limited upside

The 3 months correlation between Lemonade and FedNat is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Lemonade and FedNat Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedNat Holding and Lemonade 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 Lemonade are associated (or correlated) with FedNat Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FedNat Holding has no effect on the direction of Lemonade i.e., Lemonade and FedNat Holding go up and down completely randomly.

Pair Corralation between Lemonade and FedNat Holding

If you would invest  1,813  in Lemonade on October 26, 2024 and sell it today you would earn a total of  1,398  from holding Lemonade or generate 77.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Lemonade  vs.  FedNat Holding

Lemonade

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lemonade are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Lemonade exhibited solid returns over the last few months and may actually be approaching a breakup point.

FedNat Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FedNat Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, FedNat Holding is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Lemonade and FedNat Holding

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

The idea behind Lemonade and FedNat Holding 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.