Correlation Between RLI Corp and Genuine Parts

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

By analyzing existing cross correlation between RLI Corp and Genuine Parts Co, you can compare the effects of market volatilities on RLI Corp and Genuine Parts 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 Genuine Parts. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLI Corp and Genuine Parts.

Diversification Opportunities for RLI Corp and Genuine Parts

0.54

Correlation Coefficient

RLI Corp  Genuine Parts

Very weak diversification

The 3 months correlation between RLI and Genuine is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding RLI Corp and Genuine Parts Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genuine Parts 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 Genuine Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genuine Parts has no effect on the direction of RLI Corp i.e., RLI Corp and Genuine Parts go up and down completely randomly.

Pair Corralation between RLI Corp and Genuine Parts

Considering the 90-day investment horizon RLI Corp is expected to under-perform the Genuine Parts. But the stock apears to be less risky and, when comparing its historical volatility, RLI Corp is 1.07 times less risky than Genuine Parts. The stock trades about -0.06 of its potential returns per unit of risk. The Genuine Parts Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  11,480  in Genuine Parts Co on September 13, 2025 and sell it today you would earn a total of  1,675  from holding Genuine Parts Co or generate 14.59% return on investment over 90 days.

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

RLI Corp  vs.  Genuine Parts Co

RLI Corp

Risk-Adjusted Performance

Weakest

Over the last 90 days RLI Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, RLI Corp is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Genuine Parts

Risk-Adjusted Performance

Weakest

Over the last 90 days Genuine Parts Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Genuine Parts is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with RLI Corp and Genuine Parts

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

The idea behind RLI Corp and Genuine Parts Co 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.