Correlation Between W R and Kemper

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

Diversification Opportunities for W R and Kemper

-0.43

Correlation Coefficient

W R  Kemper

Very good diversification

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

Pair Corralation between W R and Kemper

Assuming the 90 days trading horizon W R is expected to generate 1.86 times less return on investment than Kemper. But when comparing it to its historical volatility, W R Berkley is 2.11 times less risky than Kemper. It trades about 0.05 of its potential returns per unit of risk. Kemper is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,700  in Kemper on September 20, 2024 and sell it today you would earn a total of  1,772  from holding Kemper or generate 37.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

W R Berkley  vs.  Kemper

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.

Kemper

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with W R and Kemper

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

The idea behind W R Berkley and Kemper 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.