Correlation Between Selective Insurance and Kingsway Financial

Can any of the company-specific risk be diversified away by investing in both Selective Insurance and Kingsway 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 Kingsway 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 Kingsway Financial Services, you can compare the effects of market volatilities on Selective Insurance and Kingsway 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 Kingsway Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Selective Insurance and Kingsway Financial.

Diversification Opportunities for Selective Insurance and Kingsway Financial

0.31

Correlation Coefficient

Selective Insurance  Kingsway Financial

Weak diversification

The 3 months correlation between Selective and Kingsway is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Selective Insurance Group and Kingsway Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingsway 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 Kingsway Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingsway Financial has no effect on the direction of Selective Insurance i.e., Selective Insurance and Kingsway Financial go up and down completely randomly.

Pair Corralation between Selective Insurance and Kingsway Financial

Given the investment horizon of 90 days Selective Insurance Group is expected to generate 0.83 times more return on investment than Kingsway Financial. However, Selective Insurance Group is 1.2 times less risky than Kingsway Financial. It trades about 0.01 of its potential returns per unit of risk. Kingsway Financial Services is currently generating about 0.01 per unit of risk. If you would invest  8,773  in Selective Insurance Group on October 11, 2024 and sell it today you would earn a total of  329.00  from holding Selective Insurance Group or generate 3.75% return on investment over 90 days.

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

Selective Insurance Group  vs.  Kingsway Financial Services

Selective Insurance

Risk-Adjusted Performance

0 of 100

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.

Kingsway Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingsway Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Kingsway Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Selective Insurance and Kingsway Financial

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

The idea behind Selective Insurance Group and Kingsway 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.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.