Correlation Between W R and Chubb

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

Diversification Opportunities for W R and Chubb

0.62

Correlation Coefficient

W R  Chubb

Poor diversification

The 3 months correlation between WRB and Chubb is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding W R Berkley and Chubb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chubb 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 Chubb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chubb has no effect on the direction of W R i.e., W R and Chubb go up and down completely randomly.

Pair Corralation between W R and Chubb

Considering the 90-day investment horizon W R Berkley is expected to generate 1.03 times more return on investment than Chubb. However, W R is 1.03 times more volatile than Chubb. It trades about -0.02 of its potential returns per unit of risk. Chubb is currently generating about -0.05 per unit of risk. If you would invest  6,393  in W R Berkley on November 28, 2024 and sell it today you would lose (111.00) from holding W R Berkley or give up 1.74% of portfolio value over 90 days.

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

W R Berkley  vs.  Chubb

W R Berkley

Risk-Adjusted Performance

Very Weak

Over the last 90 days W R Berkley has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, W R is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Chubb

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chubb has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Chubb is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with W R and Chubb

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

The idea behind W R Berkley and Chubb 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .