Correlation Between W R and Skyward Specialty

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

Diversification Opportunities for W R and Skyward Specialty

-0.47

Correlation Coefficient

W R  Skyward Specialty

Very good diversification

The 3 months correlation between WRB-PE and Skyward is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding W R Berkley and Skyward Specialty Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skyward Specialty 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 Skyward Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skyward Specialty has no effect on the direction of W R i.e., W R and Skyward Specialty go up and down completely randomly.

Pair Corralation between W R and Skyward Specialty

Assuming the 90 days trading horizon W R Berkley is expected to generate 0.3 times more return on investment than Skyward Specialty. However, W R Berkley is 3.34 times less risky than Skyward Specialty. It trades about -0.08 of its potential returns per unit of risk. Skyward Specialty Insurance is currently generating about -0.07 per unit of risk. If you would invest  2,425  in W R Berkley on September 21, 2024 and sell it today you would lose (24.00) from holding W R Berkley or give up 0.99% of portfolio value over 90 days.

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

W R Berkley  vs.  Skyward Specialty Insurance

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.

Skyward Specialty

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Skyward Specialty Insurance are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Skyward Specialty exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with W R and Skyward Specialty

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

The idea behind W R Berkley and Skyward Specialty Insurance 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.