Correlation Between RLI Corp and W R

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

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

Diversification Opportunities for RLI Corp and W R

0.89

Correlation Coefficient

RLI Corp  W R

Very poor diversification

The 3 months correlation between RLI and WRB is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding RLI Corp and W R Berkley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on W R Berkley 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 W R. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of W R Berkley has no effect on the direction of RLI Corp i.e., RLI Corp and W R go up and down completely randomly.

Pair Corralation between RLI Corp and W R

Considering the 90-day investment horizon RLI Corp is expected to generate 0.96 times more return on investment than W R. However, RLI Corp is 1.05 times less risky than W R. It trades about -0.14 of its potential returns per unit of risk. W R Berkley is currently generating about -0.17 per unit of risk. If you would invest  17,210  in RLI Corp on September 21, 2024 and sell it today you would lose (549.00) from holding RLI Corp or give up 3.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

RLI Corp  vs.  W R Berkley

RLI Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RLI Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating essential indicators, RLI Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

W R Berkley

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in W R Berkley are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, W R is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with RLI Corp and W R

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

The idea behind RLI Corp and W R Berkley 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.