Correlation Between Selective Insurance and SGS SA

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

Diversification Opportunities for Selective Insurance and SGS SA

-0.14

Correlation Coefficient

Selective Insurance  SGS SA

Good diversification

The 3 months correlation between Selective and SGS is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Selective Insurance Group and SGS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGS SA 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 SGS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGS SA has no effect on the direction of Selective Insurance i.e., Selective Insurance and SGS SA go up and down completely randomly.

Pair Corralation between Selective Insurance and SGS SA

Given the investment horizon of 90 days Selective Insurance Group is expected to under-perform the SGS SA. But the stock apears to be less risky and, when comparing its historical volatility, Selective Insurance Group is 1.29 times less risky than SGS SA. The stock trades about -0.02 of its potential returns per unit of risk. The SGS SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9,600  in SGS SA on December 20, 2024 and sell it today you would earn a total of  400.00  from holding SGS SA or generate 4.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Selective Insurance Group  vs.  SGS SA

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.

SGS SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SGS SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, SGS SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Selective Insurance and SGS SA

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

The idea behind Selective Insurance Group and SGS SA 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.