Correlation Between Skyward Specialty and ProAssurance

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

Diversification Opportunities for Skyward Specialty and ProAssurance

0.81

Correlation Coefficient

Skyward Specialty  ProAssurance

Very poor diversification

The 3 months correlation between Skyward and ProAssurance is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Skyward Specialty Insurance and ProAssurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProAssurance 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 ProAssurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProAssurance has no effect on the direction of Skyward Specialty i.e., Skyward Specialty and ProAssurance go up and down completely randomly.

Pair Corralation between Skyward Specialty and ProAssurance

Given the investment horizon of 90 days Skyward Specialty Insurance is expected to generate 1.61 times more return on investment than ProAssurance. However, Skyward Specialty is 1.61 times more volatile than ProAssurance. It trades about -0.2 of its potential returns per unit of risk. ProAssurance is currently generating about -0.35 per unit of risk. If you would invest  4,997  in Skyward Specialty Insurance on October 11, 2024 and sell it today you would lose (436.00) from holding Skyward Specialty Insurance or give up 8.73% 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.  ProAssurance

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.

ProAssurance

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ProAssurance are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ProAssurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Skyward Specialty and ProAssurance

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

The idea behind Skyward Specialty Insurance and ProAssurance 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.