Correlation Between Sapiens International and Old Republic

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

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

Diversification Opportunities for Sapiens International and Old Republic

-0.81

Correlation Coefficient

Sapiens International  Old Republic

Pay attention - limited upside

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

Pair Corralation between Sapiens International and Old Republic

Given the investment horizon of 90 days Sapiens International is expected to under-perform the Old Republic. In addition to that, Sapiens International is 2.79 times more volatile than Old Republic International. It trades about -0.1 of its total potential returns per unit of risk. Old Republic International is currently generating about 0.02 per unit of volatility. If you would invest  3,540  in Old Republic International on September 21, 2024 and sell it today you would earn a total of  29.00  from holding Old Republic International or generate 0.82% return on investment over 90 days.

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

Sapiens International  vs.  Old Republic International

Sapiens International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sapiens International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Old Republic Interna

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Old Republic International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Old Republic is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Sapiens International and Old Republic

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

The idea behind Sapiens International and Old Republic International 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.