Correlation Between RLI Corp and NI Holdings

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

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

Diversification Opportunities for RLI Corp and NI Holdings

0.68

Correlation Coefficient

RLI Corp  NI Holdings

Poor diversification

The 3 months correlation between RLI and NODK is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding RLI Corp and NI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NI Holdings 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 NI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NI Holdings has no effect on the direction of RLI Corp i.e., RLI Corp and NI Holdings go up and down completely randomly.

Pair Corralation between RLI Corp and NI Holdings

Considering the 90-day investment horizon RLI Corp is expected to generate 1.02 times more return on investment than NI Holdings. However, RLI Corp is 1.02 times more volatile than NI Holdings. It trades about -0.06 of its potential returns per unit of risk. NI Holdings is currently generating about -0.12 per unit of risk. If you would invest  8,349  in RLI Corp on December 26, 2024 and sell it today you would lose (527.00) from holding RLI Corp or give up 6.31% of portfolio value over 90 days.

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

RLI Corp  vs.  NI Holdings

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 fairly strong essential indicators, RLI Corp is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

NI Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days NI Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with RLI Corp and NI Holdings

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

The idea behind RLI Corp and NI Holdings 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.