Correlation Between RLI Corp and Chubb

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

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

Diversification Opportunities for RLI Corp and Chubb

0.01

Correlation Coefficient

RLI Corp  Chubb

Significant diversification

The 3 months correlation between RLI and Chubb is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding RLI Corp and Chubb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chubb and RLI Corp 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 RLI Corp are associated (or correlated) with Chubb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chubb has no effect on the direction of RLI Corp i.e., RLI Corp and Chubb go up and down completely randomly.

Pair Corralation between RLI Corp and Chubb

Considering the 90-day investment horizon RLI Corp is expected to under-perform the Chubb. In addition to that, RLI Corp is 1.18 times more volatile than Chubb. It trades about -0.06 of its total potential returns per unit of risk. Chubb is currently generating about 0.07 per unit of volatility. If you would invest  27,739  in Chubb on December 26, 2024 and sell it today you would earn a total of  1,401  from holding Chubb or generate 5.05% return on investment over 90 days.

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

RLI Corp  vs.  Chubb

RLI Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days RLI Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's essential indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Chubb

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chubb are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Chubb is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with RLI Corp and Chubb

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

The idea behind RLI Corp and Chubb 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 CEOs Directory module to screen CEOs from public companies around the world.