Correlation Between Root and Hallmark Financial

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

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

Diversification Opportunities for Root and Hallmark Financial

-0.65

Correlation Coefficient

Root  Hallmark Financial

Excellent diversification

The 3 months correlation between Root and Hallmark is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Root Inc and Hallmark Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hallmark Financial and Root 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 Root Inc are associated (or correlated) with Hallmark Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hallmark Financial has no effect on the direction of Root i.e., Root and Hallmark Financial go up and down completely randomly.

Pair Corralation between Root and Hallmark Financial

Given the investment horizon of 90 days Root Inc is expected to generate 1.32 times more return on investment than Hallmark Financial. However, Root is 1.32 times more volatile than Hallmark Financial Services. It trades about 0.1 of its potential returns per unit of risk. Hallmark Financial Services is currently generating about -0.02 per unit of risk. If you would invest  612.00  in Root Inc on October 23, 2024 and sell it today you would earn a total of  7,448  from holding Root Inc or generate 1216.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	24.24%
Values	Daily Returns

Root Inc  vs.  Hallmark Financial Services

Root Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Root Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Root unveiled solid returns over the last few months and may actually be approaching a breakup point.

Hallmark Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hallmark Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Hallmark Financial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Root and Hallmark Financial

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

The idea behind Root Inc and Hallmark Financial Services 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..