Correlation Between Markel and Kinsale Capital

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

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

Diversification Opportunities for Markel and Kinsale Capital

0.66

Correlation Coefficient

Markel  Kinsale Capital

Poor diversification

The 3 months correlation between Markel and Kinsale is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Markel and Kinsale Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinsale Capital Group and Markel 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 Markel are associated (or correlated) with Kinsale Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinsale Capital Group has no effect on the direction of Markel i.e., Markel and Kinsale Capital go up and down completely randomly.

Pair Corralation between Markel and Kinsale Capital

Considering the 90-day investment horizon Markel is expected to generate 0.66 times more return on investment than Kinsale Capital. However, Markel is 1.52 times less risky than Kinsale Capital. It trades about 0.16 of its potential returns per unit of risk. Kinsale Capital Group is currently generating about 0.07 per unit of risk. If you would invest  157,519  in Markel on September 3, 2024 and sell it today you would earn a total of  20,773  from holding Markel or generate 13.19% return on investment over 90 days.

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

Markel  vs.  Kinsale Capital Group

Markel

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Markel are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Markel disclosed solid returns over the last few months and may actually be approaching a breakup point.

Kinsale Capital Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kinsale Capital Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Kinsale Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Markel and Kinsale Capital

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

The idea behind Markel and Kinsale Capital Group 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.