Correlation Between Reinsurance Group and Fidelity National

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

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

Diversification Opportunities for Reinsurance Group and Fidelity National

0.18

Correlation Coefficient

Reinsurance Group  Fidelity National

Average diversification

The 3 months correlation between Reinsurance and Fidelity is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Reinsurance Group of and Fidelity National Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity National and Reinsurance Group 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 Reinsurance Group of are associated (or correlated) with Fidelity National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity National has no effect on the direction of Reinsurance Group i.e., Reinsurance Group and Fidelity National go up and down completely randomly.

Pair Corralation between Reinsurance Group and Fidelity National

Considering the 90-day investment horizon Reinsurance Group of is expected to under-perform the Fidelity National. In addition to that, Reinsurance Group is 2.3 times more volatile than Fidelity National Financial. It trades about -0.17 of its total potential returns per unit of risk. Fidelity National Financial is currently generating about 0.4 per unit of volatility. If you would invest  5,817  in Fidelity National Financial on December 2, 2024 and sell it today you would earn a total of  636.00  from holding Fidelity National Financial or generate 10.93% return on investment over 90 days.

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

Reinsurance Group of  vs.  Fidelity National Financial

Reinsurance Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reinsurance Group of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Fidelity National

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity National Financial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Fidelity National is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Reinsurance Group and Fidelity National

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

The idea behind Reinsurance Group of and Fidelity National Financial 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.