Correlation Between Reinsurance Group and MSP Recovery

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

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

Diversification Opportunities for Reinsurance Group and MSP Recovery

0.07

Correlation Coefficient

Reinsurance Group  MSP Recovery

Significant diversification

The 3 months correlation between Reinsurance and MSP is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Reinsurance Group of and MSP Recovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSP Recovery and Reinsurance Group 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 Reinsurance Group of are associated (or correlated) with MSP Recovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSP Recovery has no effect on the direction of Reinsurance Group i.e., Reinsurance Group and MSP Recovery go up and down completely randomly.

Pair Corralation between Reinsurance Group and MSP Recovery

Considering the 90-day investment horizon Reinsurance Group is expected to generate 142.18 times less return on investment than MSP Recovery. But when comparing it to its historical volatility, Reinsurance Group of is 25.96 times less risky than MSP Recovery. It trades about 0.01 of its potential returns per unit of risk. MSP Recovery is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  230.00  in MSP Recovery on October 8, 2024 and sell it today you would earn a total of  12.00  from holding MSP Recovery or generate 5.22% return on investment over 90 days.

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

Reinsurance Group of  vs.  MSP Recovery

Reinsurance Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reinsurance Group of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Reinsurance Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

MSP Recovery

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MSP Recovery are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, MSP Recovery reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reinsurance Group and MSP Recovery

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

The idea behind Reinsurance Group of and MSP Recovery 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.