Correlation Between WR Berkley and Loews Corp

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

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

Diversification Opportunities for WR Berkley and Loews Corp

-0.23

Correlation Coefficient

WR Berkley  Loews Corp

Very good diversification

The 3 months correlation between WRB-PF and Loews is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding WR Berkley and Loews Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loews Corp and WR Berkley 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 WR Berkley are associated (or correlated) with Loews Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loews Corp has no effect on the direction of WR Berkley i.e., WR Berkley and Loews Corp go up and down completely randomly.

Pair Corralation between WR Berkley and Loews Corp

Assuming the 90 days trading horizon WR Berkley is expected to under-perform the Loews Corp. But the preferred stock apears to be less risky and, when comparing its historical volatility, WR Berkley is 2.05 times less risky than Loews Corp. The preferred stock trades about -0.16 of its potential returns per unit of risk. The Loews Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  8,602  in Loews Corp on January 16, 2025 and sell it today you would earn a total of  11.00  from holding Loews Corp or generate 0.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

WR Berkley  vs.  Loews Corp

WR Berkley

Risk-Adjusted Performance

Very Weak

Over the last 90 days WR Berkley has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Preferred Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Loews Corp

Risk-Adjusted Performance

Weak

Over the last 90 days Loews Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Loews Corp is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with WR Berkley and Loews Corp

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

The idea behind WR Berkley and Loews Corp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.