Correlation Between Loews Corp and Tokio Marine

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

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

Diversification Opportunities for Loews Corp and Tokio Marine

0.66

Correlation Coefficient

Loews Corp  Tokio Marine

Poor diversification

The 3 months correlation between Loews and Tokio is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Loews Corp and Tokio Marine Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokio Marine Holdings and Loews Corp 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 Loews Corp are associated (or correlated) with Tokio Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokio Marine Holdings has no effect on the direction of Loews Corp i.e., Loews Corp and Tokio Marine go up and down completely randomly.

Pair Corralation between Loews Corp and Tokio Marine

Assuming the 90 days horizon Loews Corp is expected to generate 0.75 times more return on investment than Tokio Marine. However, Loews Corp is 1.34 times less risky than Tokio Marine. It trades about 0.16 of its potential returns per unit of risk. Tokio Marine Holdings is currently generating about 0.05 per unit of risk. If you would invest  7,045  in Loews Corp on September 30, 2024 and sell it today you would earn a total of  1,105  from holding Loews Corp or generate 15.68% return on investment over 90 days.

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

Loews Corp  vs.  Tokio Marine Holdings

Loews Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Loews Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Loews Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Tokio Marine Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tokio Marine Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tokio Marine may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Loews Corp and Tokio Marine

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

The idea behind Loews Corp and Tokio Marine Holdings 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.