Correlation Between Selective Insurance and Sibanye Stillwater

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

Diversification Opportunities for Selective Insurance and Sibanye Stillwater

-0.3

Correlation Coefficient

Selective Insurance  Sibanye Stillwater

Very good diversification

The 3 months correlation between Selective and Sibanye is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Selective Insurance Group and Sibanye Stillwater Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sibanye Stillwater 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 Sibanye Stillwater. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sibanye Stillwater has no effect on the direction of Selective Insurance i.e., Selective Insurance and Sibanye Stillwater go up and down completely randomly.

Pair Corralation between Selective Insurance and Sibanye Stillwater

Assuming the 90 days horizon Selective Insurance Group is expected to generate 0.46 times more return on investment than Sibanye Stillwater. However, Selective Insurance Group is 2.19 times less risky than Sibanye Stillwater. It trades about 0.06 of its potential returns per unit of risk. Sibanye Stillwater Limited is currently generating about -0.14 per unit of risk. If you would invest  8,416  in Selective Insurance Group on October 6, 2024 and sell it today you would earn a total of  284.00  from holding Selective Insurance Group or generate 3.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

Selective Insurance Group  vs.  Sibanye Stillwater Limited

Selective Insurance

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Selective Insurance Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Selective Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Sibanye Stillwater

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sibanye Stillwater Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Selective Insurance and Sibanye Stillwater

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

The idea behind Selective Insurance Group and Sibanye Stillwater Limited 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.