Correlation Between SWK Holdings and Assurant

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

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

Diversification Opportunities for SWK Holdings and Assurant

-0.7

Correlation Coefficient

SWK Holdings  Assurant

Excellent diversification

The 3 months correlation between SWK and Assurant is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding SWK Holdings and Assurant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assurant and SWK Holdings 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 SWK Holdings are associated (or correlated) with Assurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assurant has no effect on the direction of SWK Holdings i.e., SWK Holdings and Assurant go up and down completely randomly.

Pair Corralation between SWK Holdings and Assurant

Assuming the 90 days horizon SWK Holdings is expected to generate 1.07 times less return on investment than Assurant. But when comparing it to its historical volatility, SWK Holdings is 2.58 times less risky than Assurant. It trades about 0.11 of its potential returns per unit of risk. Assurant is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,789  in Assurant on October 4, 2024 and sell it today you would earn a total of  255.00  from holding Assurant or generate 14.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.86%
Values	Daily Returns

SWK Holdings  vs.  Assurant

SWK Holdings

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SWK Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical indicators, SWK Holdings is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Assurant

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Assurant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with SWK Holdings and Assurant

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

The idea behind SWK Holdings and Assurant 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.