Correlation Between Arthur J and CorVel Corp

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

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

Diversification Opportunities for Arthur J and CorVel Corp

0.58

Correlation Coefficient

Arthur J  CorVel Corp

Very weak diversification

The 3 months correlation between Arthur and CorVel is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Arthur J Gallagher and CorVel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CorVel Corp and Arthur J 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 Arthur J Gallagher are associated (or correlated) with CorVel Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CorVel Corp has no effect on the direction of Arthur J i.e., Arthur J and CorVel Corp go up and down completely randomly.

Pair Corralation between Arthur J and CorVel Corp

Considering the 90-day investment horizon Arthur J is expected to generate 2.77 times less return on investment than CorVel Corp. But when comparing it to its historical volatility, Arthur J Gallagher is 1.78 times less risky than CorVel Corp. It trades about 0.09 of its potential returns per unit of risk. CorVel Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  30,949  in CorVel Corp on September 2, 2024 and sell it today you would earn a total of  5,591  from holding CorVel Corp or generate 18.07% return on investment over 90 days.

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

Arthur J Gallagher  vs.  CorVel Corp

Arthur J Gallagher

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arthur J Gallagher are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating forward-looking indicators, Arthur J may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CorVel Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CorVel Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, CorVel Corp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arthur J and CorVel Corp

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

The idea behind Arthur J Gallagher and CorVel 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.