Correlation Between Markel and NI Holdings

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

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

Diversification Opportunities for Markel and NI Holdings

0.79

Correlation Coefficient

Markel  NI Holdings

Poor diversification

The 3 months correlation between Markel and NODK is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Markel and NI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NI Holdings and Markel 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 Markel are associated (or correlated) with NI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NI Holdings has no effect on the direction of Markel i.e., Markel and NI Holdings go up and down completely randomly.

Pair Corralation between Markel and NI Holdings

Considering the 90-day investment horizon Markel is expected to generate 3.53 times less return on investment than NI Holdings. But when comparing it to its historical volatility, Markel is 1.8 times less risky than NI Holdings. It trades about 0.09 of its potential returns per unit of risk. NI Holdings is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,574  in NI Holdings on September 16, 2024 and sell it today you would earn a total of  94.00  from holding NI Holdings or generate 5.97% return on investment over 90 days.

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

Markel  vs.  NI Holdings

Markel

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Markel are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Markel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NI Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NI Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, NI Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Markel and NI Holdings

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

The idea behind Markel and NI 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.