Correlation Between Tri Pointe and Selective Insurance

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

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

Diversification Opportunities for Tri Pointe and Selective Insurance

0.23

Correlation Coefficient

Tri Pointe  Selective Insurance

Modest diversification

The 3 months correlation between Tri and Selective is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Tri Pointe Homes and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance and Tri Pointe 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 Tri Pointe Homes are associated (or correlated) with Selective Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selective Insurance has no effect on the direction of Tri Pointe i.e., Tri Pointe and Selective Insurance go up and down completely randomly.

Pair Corralation between Tri Pointe and Selective Insurance

Assuming the 90 days horizon Tri Pointe Homes is expected to under-perform the Selective Insurance. In addition to that, Tri Pointe is 1.02 times more volatile than Selective Insurance Group. It trades about -0.12 of its total potential returns per unit of risk. Selective Insurance Group is currently generating about 0.07 per unit of volatility. If you would invest  8,167  in Selective Insurance Group on September 24, 2024 and sell it today you would earn a total of  633.00  from holding Selective Insurance Group or generate 7.75% return on investment over 90 days.

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

Tri Pointe Homes  vs.  Selective Insurance Group

Tri Pointe Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tri Pointe Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Selective Insurance

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Selective Insurance Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Selective Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tri Pointe and Selective Insurance

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

The idea behind Tri Pointe Homes and Selective Insurance Group 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.