Correlation Between Heritage Insurance and Lemonade

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

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

Diversification Opportunities for Heritage Insurance and Lemonade

0.0

Correlation Coefficient

Heritage Insurance  Lemonade

Pay attention - limited upside

The 3 months correlation between Heritage and Lemonade is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Insurance Hldgs and Lemonade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lemonade and Heritage Insurance 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 Heritage Insurance Hldgs are associated (or correlated) with Lemonade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lemonade has no effect on the direction of Heritage Insurance i.e., Heritage Insurance and Lemonade go up and down completely randomly.

Pair Corralation between Heritage Insurance and Lemonade

Given the investment horizon of 90 days Heritage Insurance is expected to generate 1.01 times less return on investment than Lemonade. But when comparing it to its historical volatility, Heritage Insurance Hldgs is 1.19 times less risky than Lemonade. It trades about 0.08 of its potential returns per unit of risk. Lemonade is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,443  in Lemonade on May 7, 2025 and sell it today you would earn a total of  3,270  from holding Lemonade or generate 226.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Heritage Insurance Hldgs  vs.  Lemonade

Heritage Insurance Hldgs

Risk-Adjusted Performance

Very Weak

Over the last 90 days Heritage Insurance Hldgs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Lemonade

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lemonade are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Lemonade exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Heritage Insurance and Lemonade

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

The idea behind Heritage Insurance Hldgs and Lemonade 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.