Correlation Between RLI Corp and Argo Group

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

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

Diversification Opportunities for RLI Corp and Argo Group

0.78

Correlation Coefficient

RLI Corp  Argo Group

Poor diversification

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

Pair Corralation between RLI Corp and Argo Group

Considering the 90-day investment horizon RLI Corp is expected to generate 4.52 times more return on investment than Argo Group. However, RLI Corp is 4.52 times more volatile than Argo Group International. It trades about 0.31 of its potential returns per unit of risk. Argo Group International is currently generating about 0.08 per unit of risk. If you would invest  15,210  in RLI Corp on August 9, 2024 and sell it today you would earn a total of  1,522  from holding RLI Corp or generate 10.01% return on investment over 90 days.

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

RLI Corp  vs.  Argo Group International

RLI Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RLI Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating essential indicators, RLI Corp demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Argo Group International

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Argo Group International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Argo Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with RLI Corp and Argo Group

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

The idea behind RLI Corp and Argo Group International 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.