Correlation Between Markel and RLI Corp

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

By analyzing existing cross correlation between Markel and RLI Corp, you can compare the effects of market volatilities on Markel and RLI Corp 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 RLI Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Markel and RLI Corp.

Diversification Opportunities for Markel and RLI Corp

0.89

Correlation Coefficient

Markel  RLI Corp

Very poor diversification

The 3 months correlation between Markel and RLI is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Markel and RLI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RLI Corp 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 RLI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RLI Corp has no effect on the direction of Markel i.e., Markel and RLI Corp go up and down completely randomly.

Pair Corralation between Markel and RLI Corp

Considering the 90-day investment horizon Markel is expected to generate 0.95 times more return on investment than RLI Corp. However, Markel is 1.05 times less risky than RLI Corp. It trades about 0.06 of its potential returns per unit of risk. RLI Corp is currently generating about -0.13 per unit of risk. If you would invest  170,627  in Markel on September 19, 2024 and sell it today you would earn a total of  1,823  from holding Markel or generate 1.07% return on investment over 90 days.

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

Markel  vs.  RLI Corp

Markel

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Markel are ranked lower than 9 (%) 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.

RLI Corp

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Markel and RLI Corp

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

The idea behind Markel and RLI Corp 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.