Correlation Between Selective Insurance and Stifel Financial

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

Diversification Opportunities for Selective Insurance and Stifel Financial

0.86

Correlation Coefficient

Selective Insurance  Stifel Financial

Very poor diversification

The 3 months correlation between Selective and Stifel is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Selective Insurance Group and Stifel Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stifel 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 Stifel Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stifel Financial has no effect on the direction of Selective Insurance i.e., Selective Insurance and Stifel Financial go up and down completely randomly.

Pair Corralation between Selective Insurance and Stifel Financial

Given the investment horizon of 90 days Selective Insurance is expected to generate 2.57 times less return on investment than Stifel Financial. But when comparing it to its historical volatility, Selective Insurance Group is 1.28 times less risky than Stifel Financial. It trades about 0.12 of its potential returns per unit of risk. Stifel Financial is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  8,526  in Stifel Financial on August 31, 2024 and sell it today you would earn a total of  3,102  from holding Stifel Financial or generate 36.38% return on investment over 90 days.

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

Selective Insurance Group  vs.  Stifel Financial

Selective Insurance

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Selective Insurance Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, Selective Insurance demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Stifel Financial

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stifel Financial are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Stifel Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Selective Insurance and Stifel Financial

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

The idea behind Selective Insurance Group and Stifel 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.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.