Correlation Between W R and Old Republic

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

Diversification Opportunities for W R and Old Republic

0.7

Correlation Coefficient

W R  Old Republic

Poor diversification

The 3 months correlation between WRB-PE and Old is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding W R Berkley and Old Republic International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Republic Interna 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 Old Republic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Republic Interna has no effect on the direction of W R i.e., W R and Old Republic go up and down completely randomly.

Pair Corralation between W R and Old Republic

Assuming the 90 days trading horizon W R is expected to generate 5.17 times less return on investment than Old Republic. But when comparing it to its historical volatility, W R Berkley is 1.41 times less risky than Old Republic. It trades about 0.04 of its potential returns per unit of risk. Old Republic International is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,683  in Old Republic International on August 2, 2024 and sell it today you would earn a total of  810.00  from holding Old Republic International or generate 30.19% return on investment over 90 days.

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

W R Berkley  vs.  Old Republic International

W R Berkley

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in W R Berkley are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. 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.

Old Republic Interna

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Old Republic International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Old Republic is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with W R and Old Republic

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

The idea behind W R Berkley and Old Republic International 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.