Correlation Between Skyward Specialty and Kemper

Can any of the company-specific risk be diversified away by investing in both Skyward Specialty and Kemper 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 Skyward Specialty and Kemper into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Skyward Specialty Insurance and Kemper, you can compare the effects of market volatilities on Skyward Specialty and Kemper 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 Skyward Specialty with a short position of Kemper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skyward Specialty and Kemper.

Diversification Opportunities for Skyward Specialty and Kemper

0.83

Correlation Coefficient

Skyward Specialty  Kemper

Very poor diversification

The 3 months correlation between Skyward and Kemper is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Skyward Specialty Insurance and Kemper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kemper and Skyward Specialty 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 Skyward Specialty Insurance are associated (or correlated) with Kemper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kemper has no effect on the direction of Skyward Specialty i.e., Skyward Specialty and Kemper go up and down completely randomly.

Pair Corralation between Skyward Specialty and Kemper

Given the investment horizon of 90 days Skyward Specialty Insurance is expected to under-perform the Kemper. In addition to that, Skyward Specialty is 1.45 times more volatile than Kemper. It trades about -0.2 of its total potential returns per unit of risk. Kemper is currently generating about -0.09 per unit of volatility. If you would invest  6,666  in Kemper on October 11, 2024 and sell it today you would lose (188.00) from holding Kemper or give up 2.82% of portfolio value over 90 days.

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

Skyward Specialty Insurance  vs.  Kemper

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.

Kemper

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kemper are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Kemper may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Skyward Specialty and Kemper

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

The idea behind Skyward Specialty Insurance and Kemper 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 Transaction History module to view history of all your transactions and understand their impact on performance.