Correlation Between Chubb and Old Republic

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

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

Diversification Opportunities for Chubb and Old Republic

0.69

Correlation Coefficient

Chubb  Old Republic

Poor diversification

The 3 months correlation between Chubb and Old is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Chubb 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 Chubb 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 Chubb 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 Chubb i.e., Chubb and Old Republic go up and down completely randomly.

Pair Corralation between Chubb and Old Republic

Allowing for the 90-day total investment horizon Chubb is expected to generate 1.78 times less return on investment than Old Republic. In addition to that, Chubb is 1.03 times more volatile than Old Republic International. It trades about 0.08 of its total potential returns per unit of risk. Old Republic International is currently generating about 0.14 per unit of volatility. If you would invest  3,346  in Old Republic International on August 11, 2024 and sell it today you would earn a total of  337.00  from holding Old Republic International or generate 10.07% return on investment over 90 days.

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

Chubb  vs.  Old Republic International

Chubb

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chubb are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Chubb is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Old Republic Interna

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Old Republic International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Old Republic may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Chubb and Old Republic

The main advantage of trading using opposite Chubb and Old Republic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chubb 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 Chubb 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.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.