Correlation Between W R and Lemonade

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

Diversification Opportunities for W R and Lemonade

-0.43

Correlation Coefficient

W R  Lemonade

Very good diversification

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

Pair Corralation between W R and Lemonade

Assuming the 90 days trading horizon W R Berkley is expected to under-perform the Lemonade. But the preferred stock apears to be less risky and, when comparing its historical volatility, W R Berkley is 13.32 times less risky than Lemonade. The preferred stock trades about -0.02 of its potential returns per unit of risk. The Lemonade is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  3,431  in Lemonade on September 19, 2024 and sell it today you would earn a total of  869.00  from holding Lemonade or generate 25.33% return on investment over 90 days.

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

W R Berkley  vs.  Lemonade

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Lemonade

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lemonade are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Lemonade exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with W R and Lemonade

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

The idea behind W R Berkley and Lemonade 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.