Correlation Between Kemper and Tokio Marine

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

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

Diversification Opportunities for Kemper and Tokio Marine

0.68

Correlation Coefficient

Kemper  Tokio Marine

Poor diversification

The 3 months correlation between Kemper and Tokio is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Kemper and Tokio Marine Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokio Marine Holdings and Kemper 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 Kemper are associated (or correlated) with Tokio Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokio Marine Holdings has no effect on the direction of Kemper i.e., Kemper and Tokio Marine go up and down completely randomly.

Pair Corralation between Kemper and Tokio Marine

Assuming the 90 days horizon Kemper is expected to generate 1.26 times less return on investment than Tokio Marine. But when comparing it to its historical volatility, Kemper is 1.17 times less risky than Tokio Marine. It trades about 0.06 of its potential returns per unit of risk. Tokio Marine Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,084  in Tokio Marine Holdings on September 30, 2024 and sell it today you would earn a total of  1,359  from holding Tokio Marine Holdings or generate 65.21% return on investment over 90 days.

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

Kemper  vs.  Tokio Marine Holdings

Kemper

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kemper are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Kemper reported solid returns over the last few months and may actually be approaching a breakup point.

Tokio Marine Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tokio Marine Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tokio Marine may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Kemper and Tokio Marine

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

The idea behind Kemper and Tokio Marine Holdings 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.