Correlation Between Old Republic and Donegal Group

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

By analyzing existing cross correlation between Old Republic International and Donegal Group B, you can compare the effects of market volatilities on Old Republic and Donegal Group 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 Old Republic with a short position of Donegal Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Republic and Donegal Group.

Diversification Opportunities for Old Republic and Donegal Group

0.63

Correlation Coefficient

Old Republic  Donegal Group

Poor diversification

The 3 months correlation between Old and Donegal is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Old Republic International and Donegal Group B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Donegal Group B and Old Republic 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 Old Republic International are associated (or correlated) with Donegal Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Donegal Group B has no effect on the direction of Old Republic i.e., Old Republic and Donegal Group go up and down completely randomly.

Pair Corralation between Old Republic and Donegal Group

Considering the 90-day investment horizon Old Republic International is expected to generate 0.43 times more return on investment than Donegal Group. However, Old Republic International is 2.32 times less risky than Donegal Group. It trades about -0.14 of its potential returns per unit of risk. Donegal Group B is currently generating about -0.13 per unit of risk. If you would invest  3,586  in Old Republic International on October 6, 2024 and sell it today you would lose (148.00) from holding Old Republic International or give up 4.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.0%
Values	Daily Returns

Old Republic International  vs.  Donegal Group B

Old Republic Interna

Risk-Adjusted Performance

6 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Old Republic International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Old Republic is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Donegal Group B

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Donegal Group B are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental indicators, Donegal Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Old Republic and Donegal Group

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

The idea behind Old Republic International and Donegal Group B 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.