Correlation Between White Mountains and W R

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

Diversification Opportunities for White Mountains and W R

-0.51

Correlation Coefficient

White Mountains  W R

Excellent diversification

The 3 months correlation between White and WRB-PE is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding White Mountains Insurance and W R Berkley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on W R Berkley 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 W R. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of W R Berkley has no effect on the direction of White Mountains i.e., White Mountains and W R go up and down completely randomly.

Pair Corralation between White Mountains and W R

Considering the 90-day investment horizon White Mountains Insurance is expected to generate 2.83 times more return on investment than W R. However, White Mountains is 2.83 times more volatile than W R Berkley. It trades about 0.04 of its potential returns per unit of risk. W R Berkley is currently generating about 0.09 per unit of risk. If you would invest  182,967  in White Mountains Insurance on September 19, 2024 and sell it today you would earn a total of  10,482  from holding White Mountains Insurance or generate 5.73% return on investment over 90 days.

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

White Mountains Insurance  vs.  W R Berkley

White Mountains Insurance

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in White Mountains Insurance are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, White Mountains may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with White Mountains and W R

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

The idea behind White Mountains Insurance and W R Berkley 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.