Correlation Between Reinsurance Group and RenaissanceRe Holdings
Can any of the company-specific risk be diversified away by investing in both Reinsurance Group and RenaissanceRe Holdings 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 RenaissanceRe Holdings 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 RenaissanceRe Holdings, you can compare the effects of market volatilities on Reinsurance Group and RenaissanceRe Holdings 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 RenaissanceRe Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reinsurance Group and RenaissanceRe Holdings.
Diversification Opportunities for Reinsurance Group and RenaissanceRe Holdings
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Reinsurance and RenaissanceRe is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Reinsurance Group of and RenaissanceRe Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RenaissanceRe Holdings 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 RenaissanceRe Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RenaissanceRe Holdings has no effect on the direction of Reinsurance Group i.e., Reinsurance Group and RenaissanceRe Holdings go up and down completely randomly.
Pair Corralation between Reinsurance Group and RenaissanceRe Holdings
Assuming the 90 days trading horizon Reinsurance Group of is expected to under-perform the RenaissanceRe Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Reinsurance Group of is 1.25 times less risky than RenaissanceRe Holdings. The stock trades about -0.42 of its potential returns per unit of risk. The RenaissanceRe Holdings is currently generating about -0.3 of returns per unit of risk over similar time horizon. If you would invest 26,559 in RenaissanceRe Holdings on September 24, 2024 and sell it today you would lose (2,759) from holding RenaissanceRe Holdings or give up 10.39% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Reinsurance Group of vs. RenaissanceRe Holdings
Performance |
Timeline |
Reinsurance Group |
RenaissanceRe Holdings |
Reinsurance Group and RenaissanceRe Holdings Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Reinsurance Group and RenaissanceRe Holdings
The main advantage of trading using opposite Reinsurance Group and RenaissanceRe Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reinsurance Group position performs unexpectedly, RenaissanceRe Holdings 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 RenaissanceRe Holdings will offset losses from the drop in RenaissanceRe Holdings' long position.Reinsurance Group vs. MUENCHRUECKUNSADR 110 | Reinsurance Group vs. Swiss Re AG | Reinsurance Group vs. HANNRUECKVSE ADR 12ON | Reinsurance Group vs. Everest Group |
RenaissanceRe Holdings vs. MUENCHRUECKUNSADR 110 | RenaissanceRe Holdings vs. Swiss Re AG | RenaissanceRe Holdings vs. HANNRUECKVSE ADR 12ON | RenaissanceRe Holdings vs. Everest Group |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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