Correlation Between Selective Insurance and WR Berkley

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

Diversification Opportunities for Selective Insurance and WR Berkley

0.74

Correlation Coefficient

Selective Insurance  WR Berkley

Poor diversification

The 3 months correlation between Selective and WRB-PF is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Selective Insurance Group and WR Berkley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WR Berkley 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 WR Berkley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WR Berkley has no effect on the direction of Selective Insurance i.e., Selective Insurance and WR Berkley go up and down completely randomly.

Pair Corralation between Selective Insurance and WR Berkley

Assuming the 90 days horizon Selective Insurance Group is expected to generate 0.76 times more return on investment than WR Berkley. However, Selective Insurance Group is 1.32 times less risky than WR Berkley. It trades about 0.0 of its potential returns per unit of risk. WR Berkley is currently generating about -0.09 per unit of risk. If you would invest  1,885  in Selective Insurance Group on September 13, 2024 and sell it today you would earn a total of  0.00  from holding Selective Insurance Group or generate 0.0% return on investment over 90 days.

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

Selective Insurance Group  vs.  WR Berkley

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. Even with relatively invariable forward indicators, Selective Insurance is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

WR Berkley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WR Berkley has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, WR Berkley is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Selective Insurance and WR Berkley

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

The idea behind Selective Insurance Group and WR Berkley 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .