Correlation Between Pekin Life and Employers Holdings

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

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

Diversification Opportunities for Pekin Life and Employers Holdings

0.48

Correlation Coefficient

Pekin Life  Employers Holdings

Very weak diversification

The 3 months correlation between Pekin and Employers is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Pekin Life Insurance and Employers Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Employers Holdings and Pekin Life 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 Pekin Life Insurance are associated (or correlated) with Employers Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Employers Holdings has no effect on the direction of Pekin Life i.e., Pekin Life and Employers Holdings go up and down completely randomly.

Pair Corralation between Pekin Life and Employers Holdings

Given the investment horizon of 90 days Pekin Life is expected to generate 5.39 times less return on investment than Employers Holdings. In addition to that, Pekin Life is 1.22 times more volatile than Employers Holdings. It trades about 0.01 of its total potential returns per unit of risk. Employers Holdings is currently generating about 0.04 per unit of volatility. If you would invest  4,206  in Employers Holdings on August 20, 2024 and sell it today you would earn a total of  1,082  from holding Employers Holdings or generate 25.73% return on investment over 90 days.

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

Pekin Life Insurance  vs.  Employers Holdings

Pekin Life Insurance

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pekin Life Insurance are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Pekin Life is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Employers Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Employers Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward indicators, Employers Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pekin Life and Employers Holdings

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

The idea behind Pekin Life Insurance and Employers Holdings 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .