Correlation Between W R and American Coastal

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

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

Diversification Opportunities for W R and American Coastal

-0.69

Correlation Coefficient

W R  American Coastal

Excellent diversification

The 3 months correlation between WRB and American is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding W R Berkley and American Coastal Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Coastal Ins and W R 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 W R Berkley are associated (or correlated) with American Coastal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Coastal Ins has no effect on the direction of W R i.e., W R and American Coastal go up and down completely randomly.

Pair Corralation between W R and American Coastal

Considering the 90-day investment horizon W R Berkley is expected to generate 0.83 times more return on investment than American Coastal. However, W R Berkley is 1.21 times less risky than American Coastal. It trades about 0.17 of its potential returns per unit of risk. American Coastal Insurance is currently generating about -0.03 per unit of risk. If you would invest  5,944  in W R Berkley on February 1, 2025 and sell it today you would earn a total of  1,174  from holding W R Berkley or generate 19.75% return on investment over 90 days.

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

W R Berkley  vs.  American Coastal Insurance

W R Berkley

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in W R Berkley are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, W R sustained solid returns over the last few months and may actually be approaching a breakup point.

American Coastal Ins

Risk-Adjusted Performance

Very Weak

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

Pair Trading with W R and American Coastal

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

The idea behind W R Berkley and American Coastal Insurance 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 CEOs Directory module to screen CEOs from public companies around the world.