Correlation Between White Mountains and Chubb

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

By analyzing existing cross correlation between White Mountains Insurance and Chubb, you can compare the effects of market volatilities on White Mountains 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 White Mountains with a short position of Chubb. Check out your portfolio center. Please also check ongoing floating volatility patterns of White Mountains and Chubb.

Diversification Opportunities for White Mountains and Chubb

-0.01

Correlation Coefficient

White Mountains  Chubb

Good diversification

The 3 months correlation between White and Chubb is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding White Mountains Insurance and Chubb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chubb and White Mountains 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 White Mountains Insurance 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 White Mountains i.e., White Mountains and Chubb go up and down completely randomly.

Pair Corralation between White Mountains and Chubb

Considering the 90-day investment horizon White Mountains Insurance is expected to under-perform the Chubb. But the stock apears to be less risky and, when comparing its historical volatility, White Mountains Insurance is 1.04 times less risky than Chubb. The stock trades about -0.01 of its potential returns per unit of risk. The Chubb is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  27,680  in Chubb on December 27, 2024 and sell it today you would earn a total of  1,852  from holding Chubb or generate 6.69% return on investment over 90 days.

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

White Mountains Insurance  vs.  Chubb

White Mountains Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days White Mountains Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, White Mountains is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Chubb

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chubb are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, Chubb may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with White Mountains and Chubb

The main advantage of trading using opposite White Mountains and Chubb positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if White Mountains 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 White Mountains Insurance 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.