Correlation Between Donegal Group and Kemper

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

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

Diversification Opportunities for Donegal Group and Kemper

0.86

Correlation Coefficient

Donegal Group  Kemper

Very poor diversification

The 3 months correlation between Donegal and Kemper is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Donegal Group A and Kemper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kemper and Donegal Group 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 Donegal Group A are associated (or correlated) with Kemper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kemper has no effect on the direction of Donegal Group i.e., Donegal Group and Kemper go up and down completely randomly.

Pair Corralation between Donegal Group and Kemper

Assuming the 90 days horizon Donegal Group is expected to generate 1.15 times less return on investment than Kemper. In addition to that, Donegal Group is 1.38 times more volatile than Kemper. It trades about 0.1 of its total potential returns per unit of risk. Kemper is currently generating about 0.16 per unit of volatility. If you would invest  6,204  in Kemper on September 4, 2024 and sell it today you would earn a total of  893.00  from holding Kemper or generate 14.39% return on investment over 90 days.

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

Donegal Group A  vs.  Kemper

Donegal Group A

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Donegal Group A are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental indicators, Donegal Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Kemper

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kemper are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Kemper reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Donegal Group and Kemper

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

The idea behind Donegal Group A and Kemper 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.