Correlation Between Pekin Life and Selective Insurance

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

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

Diversification Opportunities for Pekin Life and Selective Insurance

0.08

Correlation Coefficient

Pekin Life  Selective Insurance

Significant diversification

The 3 months correlation between Pekin and Selective is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Pekin Life Insurance and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance and Pekin Life 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 Pekin Life Insurance are associated (or correlated) with Selective Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selective Insurance has no effect on the direction of Pekin Life i.e., Pekin Life and Selective Insurance go up and down completely randomly.

Pair Corralation between Pekin Life and Selective Insurance

Given the investment horizon of 90 days Pekin Life Insurance is expected to generate 0.27 times more return on investment than Selective Insurance. However, Pekin Life Insurance is 3.69 times less risky than Selective Insurance. It trades about 0.09 of its potential returns per unit of risk. Selective Insurance Group is currently generating about 0.02 per unit of risk. If you would invest  1,150  in Pekin Life Insurance on October 24, 2024 and sell it today you would earn a total of  25.00  from holding Pekin Life Insurance or generate 2.17% return on investment over 90 days.

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

Pekin Life Insurance  vs.  Selective Insurance Group

Pekin Life Insurance

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pekin Life Insurance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Pekin Life is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Selective Insurance

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Selective Insurance Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Selective Insurance is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Pekin Life and Selective Insurance

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

The idea behind Pekin Life Insurance and Selective Insurance Group 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.