Correlation Between Selective Insurance and Skyward Specialty

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

Diversification Opportunities for Selective Insurance and Skyward Specialty

0.72

Correlation Coefficient

Selective Insurance  Skyward Specialty

Poor diversification

The 3 months correlation between Selective and Skyward is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Selective Insurance Group and Skyward Specialty Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skyward Specialty 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 Skyward Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skyward Specialty has no effect on the direction of Selective Insurance i.e., Selective Insurance and Skyward Specialty go up and down completely randomly.

Pair Corralation between Selective Insurance and Skyward Specialty

Given the investment horizon of 90 days Selective Insurance Group is expected to generate 0.55 times more return on investment than Skyward Specialty. However, Selective Insurance Group is 1.82 times less risky than Skyward Specialty. It trades about -0.23 of its potential returns per unit of risk. Skyward Specialty Insurance is currently generating about -0.2 per unit of risk. If you would invest  9,623  in Selective Insurance Group on October 11, 2024 and sell it today you would lose (521.00) from holding Selective Insurance Group or give up 5.41% of portfolio value over 90 days.

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

Selective Insurance Group  vs.  Skyward Specialty Insurance

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.

Skyward Specialty

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Skyward Specialty Insurance are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Skyward Specialty is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Selective Insurance and Skyward Specialty

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

The idea behind Selective Insurance Group and Skyward Specialty Insurance 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.