Correlation Between Selective Insurance and CNA Financial

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

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

Diversification Opportunities for Selective Insurance and CNA Financial

-0.17

Correlation Coefficient

Selective Insurance  CNA Financial

Good diversification

The 3 months correlation between Selective and CNA is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Selective Insurance Group and CNA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNA Financial and Selective Insurance 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 Selective Insurance Group are associated (or correlated) with CNA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNA Financial has no effect on the direction of Selective Insurance i.e., Selective Insurance and CNA Financial go up and down completely randomly.

Pair Corralation between Selective Insurance and CNA Financial

Given the investment horizon of 90 days Selective Insurance is expected to generate 29.67 times less return on investment than CNA Financial. In addition to that, Selective Insurance is 1.68 times more volatile than CNA Financial. It trades about 0.0 of its total potential returns per unit of risk. CNA Financial is currently generating about 0.07 per unit of volatility. If you would invest  4,783  in CNA Financial on December 28, 2024 and sell it today you would earn a total of  241.00  from holding CNA Financial or generate 5.04% return on investment over 90 days.

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

Selective Insurance Group  vs.  CNA Financial

Selective Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Selective Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Selective Insurance is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

CNA Financial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CNA Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, CNA Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Selective Insurance and CNA Financial

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

The idea behind Selective Insurance Group and CNA Financial 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.