Correlation Between W R and Global Indemnity

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

By analyzing existing cross correlation between W R Berkley and Global Indemnity PLC, you can compare the effects of market volatilities on W R and Global Indemnity 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 W R with a short position of Global Indemnity. Check out your portfolio center. Please also check ongoing floating volatility patterns of W R and Global Indemnity.

Diversification Opportunities for W R and Global Indemnity

-0.43

Correlation Coefficient

W R  Global Indemnity

Very good diversification

The 3 months correlation between WRB-PE and Global is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding W R Berkley and Global Indemnity PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Indemnity PLC and W R 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 W R Berkley are associated (or correlated) with Global Indemnity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Indemnity PLC has no effect on the direction of W R i.e., W R and Global Indemnity go up and down completely randomly.

Pair Corralation between W R and Global Indemnity

Assuming the 90 days trading horizon W R is expected to generate 42.49 times less return on investment than Global Indemnity. But when comparing it to its historical volatility, W R Berkley is 45.81 times less risky than Global Indemnity. It trades about 0.05 of its potential returns per unit of risk. Global Indemnity PLC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,182  in Global Indemnity PLC on September 20, 2024 and sell it today you would earn a total of  1,422  from holding Global Indemnity PLC or generate 65.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.59%
Values	Daily Returns

W R Berkley  vs.  Global Indemnity PLC

W R Berkley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days W R Berkley has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, W R is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Global Indemnity PLC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Indemnity PLC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak essential indicators, Global Indemnity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with W R and Global Indemnity

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

The idea behind W R Berkley and Global Indemnity PLC 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.