Correlation Between Selective Insurance and RF Acquisition

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

Diversification Opportunities for Selective Insurance and RF Acquisition

-0.35

Correlation Coefficient

Selective Insurance  RF Acquisition

Very good diversification

The 3 months correlation between Selective and RFACR is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Selective Insurance Group and RF Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RF Acquisition Corp 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 RF Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RF Acquisition Corp has no effect on the direction of Selective Insurance i.e., Selective Insurance and RF Acquisition go up and down completely randomly.

Pair Corralation between Selective Insurance and RF Acquisition

Given the investment horizon of 90 days Selective Insurance Group is expected to under-perform the RF Acquisition. But the stock apears to be less risky and, when comparing its historical volatility, Selective Insurance Group is 21.55 times less risky than RF Acquisition. The stock trades about -0.23 of its potential returns per unit of risk. The RF Acquisition Corp is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  14.00  in RF Acquisition Corp on October 11, 2024 and sell it today you would earn a total of  11.00  from holding RF Acquisition Corp or generate 78.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	76.19%
Values	Daily Returns

Selective Insurance Group  vs.  RF Acquisition Corp

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.

RF Acquisition Corp

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RF Acquisition Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental indicators, RF Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Selective Insurance and RF Acquisition

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

The idea behind Selective Insurance Group and RF Acquisition Corp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.