Correlation Between Old Republic and Lemonade

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

Diversification Opportunities for Old Republic and Lemonade

-0.11

Correlation Coefficient

Old Republic  Lemonade

Good diversification

The 3 months correlation between Old and Lemonade is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Old Republic International and Lemonade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lemonade 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 Lemonade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lemonade has no effect on the direction of Old Republic i.e., Old Republic and Lemonade go up and down completely randomly.

Pair Corralation between Old Republic and Lemonade

Considering the 90-day investment horizon Old Republic is expected to generate 2.58 times less return on investment than Lemonade. But when comparing it to its historical volatility, Old Republic International is 6.68 times less risky than Lemonade. It trades about 0.22 of its potential returns per unit of risk. Lemonade is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,374  in Lemonade on December 1, 2024 and sell it today you would earn a total of  261.00  from holding Lemonade or generate 7.74% return on investment over 90 days.

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

Old Republic International  vs.  Lemonade

Old Republic Interna

Risk-Adjusted Performance

Modest

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 inconsistent basic indicators, Old Republic may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Lemonade

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lemonade has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Old Republic and Lemonade

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

The idea behind Old Republic International and Lemonade 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.