Correlation Between RenaissanceRe Holdings and Reinsurance Group

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

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

Diversification Opportunities for RenaissanceRe Holdings and Reinsurance Group

0.46

Correlation Coefficient

RenaissanceRe Holdings  Reinsurance Group

Very weak diversification

The 3 months correlation between RenaissanceRe and Reinsurance is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding RenaissanceRe Holdings and Reinsurance Group of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reinsurance Group and RenaissanceRe Holdings 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 RenaissanceRe Holdings are associated (or correlated) with Reinsurance Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reinsurance Group has no effect on the direction of RenaissanceRe Holdings i.e., RenaissanceRe Holdings and Reinsurance Group go up and down completely randomly.

Pair Corralation between RenaissanceRe Holdings and Reinsurance Group

Assuming the 90 days horizon RenaissanceRe Holdings is expected to generate 1.44 times less return on investment than Reinsurance Group. In addition to that, RenaissanceRe Holdings is 1.08 times more volatile than Reinsurance Group of. It trades about 0.06 of its total potential returns per unit of risk. Reinsurance Group of is currently generating about 0.09 per unit of volatility. If you would invest  12,594  in Reinsurance Group of on October 12, 2024 and sell it today you would earn a total of  8,806  from holding Reinsurance Group of or generate 69.92% return on investment over 90 days.

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

RenaissanceRe Holdings  vs.  Reinsurance Group of

RenaissanceRe Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RenaissanceRe Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, RenaissanceRe Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Reinsurance Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Reinsurance Group of are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Reinsurance Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with RenaissanceRe Holdings and Reinsurance Group

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

The idea behind RenaissanceRe Holdings and Reinsurance Group of 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..