Correlation Between Renaissancere Holdings and Brookfield Reinsurance

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

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

Diversification Opportunities for Renaissancere Holdings and Brookfield Reinsurance

0.45

Correlation Coefficient

Renaissancere Holdings  Brookfield Reinsurance

Very weak diversification

The 3 months correlation between Renaissancere and Brookfield is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Renaissancere Holdings and Brookfield Reinsurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Reinsurance and Renaissancere Holdings 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 Renaissancere Holdings are associated (or correlated) with Brookfield Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Reinsurance has no effect on the direction of Renaissancere Holdings i.e., Renaissancere Holdings and Brookfield Reinsurance go up and down completely randomly.

Pair Corralation between Renaissancere Holdings and Brookfield Reinsurance

Considering the 90-day investment horizon Renaissancere Holdings is expected to generate 0.89 times more return on investment than Brookfield Reinsurance. However, Renaissancere Holdings is 1.12 times less risky than Brookfield Reinsurance. It trades about -0.01 of its potential returns per unit of risk. Brookfield Reinsurance is currently generating about -0.01 per unit of risk. If you would invest  22,298  in Renaissancere Holdings on January 31, 2024 and sell it today you would lose (130.00) from holding Renaissancere Holdings or give up 0.58% of portfolio value over 90 days.

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

Renaissancere Holdings  vs.  Brookfield Reinsurance

Renaissancere Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Renaissancere Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Renaissancere Holdings is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Brookfield Reinsurance

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Reinsurance are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Brookfield Reinsurance is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Renaissancere Holdings and Brookfield Reinsurance

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

The idea behind Renaissancere Holdings and Brookfield Reinsurance 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.