Correlation Between Stewart Information and Selective Insurance

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

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

Diversification Opportunities for Stewart Information and Selective Insurance

-0.18

Correlation Coefficient

Stewart Information  Selective Insurance

Good diversification

The 3 months correlation between Stewart and Selective is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Stewart Information Services and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance and Stewart Information 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 Stewart Information Services are associated (or correlated) with Selective Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selective Insurance has no effect on the direction of Stewart Information i.e., Stewart Information and Selective Insurance go up and down completely randomly.

Pair Corralation between Stewart Information and Selective Insurance

Considering the 90-day investment horizon Stewart Information Services is expected to generate 1.24 times more return on investment than Selective Insurance. However, Stewart Information is 1.24 times more volatile than Selective Insurance Group. It trades about 0.01 of its potential returns per unit of risk. Selective Insurance Group is currently generating about -0.11 per unit of risk. If you would invest  5,984  in Stewart Information Services on March 14, 2024 and sell it today you would earn a total of  23.00  from holding Stewart Information Services or generate 0.38% return on investment over 90 days.

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

Stewart Information Services  vs.  Selective Insurance Group

Stewart Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stewart Information Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Stewart Information is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Selective Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Selective Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Stewart Information and Selective Insurance

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

The idea behind Stewart Information Services and Selective Insurance Group 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.