Correlation Between Old Republic and Global Indemnity

Can any of the company-specific risk be diversified away by investing in both Old Republic and Global Indemnity 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 Global Indemnity 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 Global Indemnity PLC, you can compare the effects of market volatilities on Old Republic and Global Indemnity 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 Global Indemnity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Republic and Global Indemnity.

Diversification Opportunities for Old Republic and Global Indemnity

-0.24

Correlation Coefficient

Old Republic  Global Indemnity

Very good diversification

The 3 months correlation between Old and Global is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Old Republic International and Global Indemnity PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Indemnity PLC 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 Global Indemnity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Indemnity PLC has no effect on the direction of Old Republic i.e., Old Republic and Global Indemnity go up and down completely randomly.

Pair Corralation between Old Republic and Global Indemnity

Considering the 90-day investment horizon Old Republic International is expected to generate 0.68 times more return on investment than Global Indemnity. However, Old Republic International is 1.46 times less risky than Global Indemnity. It trades about 0.04 of its potential returns per unit of risk. Global Indemnity PLC is currently generating about -0.04 per unit of risk. If you would invest  3,656  in Old Republic International on November 27, 2024 and sell it today you would earn a total of  85.00  from holding Old Republic International or generate 2.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.61%
Values	Daily Returns

Old Republic International  vs.  Global Indemnity PLC

Old Republic Interna

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Old Republic International are ranked lower than 2 (%) 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.

Global Indemnity PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Indemnity PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, Global Indemnity is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Old Republic and Global Indemnity

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

The idea behind Old Republic International and Global Indemnity PLC 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.