Correlation Between Horace Mann and White Mountains

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

By analyzing existing cross correlation between Horace Mann Educators and White Mountains Insurance, you can compare the effects of market volatilities on Horace Mann and White Mountains 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 Horace Mann with a short position of White Mountains. Check out your portfolio center. Please also check ongoing floating volatility patterns of Horace Mann and White Mountains.

Diversification Opportunities for Horace Mann and White Mountains

0.78

Correlation Coefficient

Horace Mann  White Mountains

Poor diversification

The 3 months correlation between Horace and White is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Horace Mann Educators and White Mountains Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on White Mountains Insurance and Horace Mann 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 Horace Mann Educators are associated (or correlated) with White Mountains. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of White Mountains Insurance has no effect on the direction of Horace Mann i.e., Horace Mann and White Mountains go up and down completely randomly.

Pair Corralation between Horace Mann and White Mountains

Considering the 90-day investment horizon Horace Mann Educators is expected to generate 1.3 times more return on investment than White Mountains. However, Horace Mann is 1.3 times more volatile than White Mountains Insurance. It trades about 0.15 of its potential returns per unit of risk. White Mountains Insurance is currently generating about 0.1 per unit of risk. If you would invest  3,411  in Horace Mann Educators on August 23, 2024 and sell it today you would earn a total of  627.00  from holding Horace Mann Educators or generate 18.38% return on investment over 90 days.

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

Horace Mann Educators  vs.  White Mountains Insurance

Horace Mann Educators

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Horace Mann Educators are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Horace Mann displayed solid returns over the last few months and may actually be approaching a breakup point.

White Mountains Insurance

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in White Mountains Insurance are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, White Mountains may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Horace Mann and White Mountains

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

The idea behind Horace Mann Educators and White Mountains Insurance 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.