Correlation Between Alleghany and W R
Can any of the company-specific risk be diversified away by investing in both Alleghany 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 Alleghany and W R into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alleghany and W R Berkley, you can compare the effects of market volatilities on Alleghany 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 Alleghany with a short position of W R. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alleghany and W R.
Diversification Opportunities for Alleghany and W R
Significant diversification
The 3 months correlation between Alleghany and WRB is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Alleghany 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 Alleghany 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 Alleghany 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 Alleghany i.e., Alleghany and W R go up and down completely randomly.
Pair Corralation between Alleghany and W R
Taking into account the 90-day investment horizon Alleghany is expected to generate 2.79 times less return on investment than W R. But when comparing it to its historical volatility, Alleghany is 9.36 times less risky than W R. It trades about 0.1 of its potential returns per unit of risk. W R Berkley is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 6,628 in W R Berkley on February 6, 2024 and sell it today you would earn a total of 1,228 from holding W R Berkley or generate 18.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 21.82% |
| Values | Daily Returns |
Alleghany vs. W R Berkley
Performance |
| Timeline |
| Alleghany |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| W R Berkley |
Alleghany and W R Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alleghany and W R
The main advantage of trading using opposite Alleghany and W R positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alleghany 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.| Alleghany vs. Cardinal Health | Alleghany vs. Teleflex Incorporated | Alleghany vs. Biglari Holdings | Alleghany vs. Texas Roadhouse |
Check out your portfolio center.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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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