Correlation Between Arthur J and Reinsurance Group

Can any of the company-specific risk be diversified away by investing in both Arthur J and Reinsurance 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 Arthur J and Reinsurance Group 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 Reinsurance Group of, you can compare the effects of market volatilities on Arthur J and Reinsurance 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 Arthur J with a short position of Reinsurance Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arthur J and Reinsurance Group.

Diversification Opportunities for Arthur J and Reinsurance Group

0.06

Correlation Coefficient

Arthur J  Reinsurance Group

Significant diversification

The 3 months correlation between Arthur and Reinsurance is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Arthur J Gallagher and Reinsurance Group of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reinsurance Group 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 Reinsurance Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reinsurance Group has no effect on the direction of Arthur J i.e., Arthur J and Reinsurance Group go up and down completely randomly.

Pair Corralation between Arthur J and Reinsurance Group

Considering the 90-day investment horizon Arthur J Gallagher is expected to generate 3.41 times more return on investment than Reinsurance Group. However, Arthur J is 3.41 times more volatile than Reinsurance Group of. It trades about 0.05 of its potential returns per unit of risk. Reinsurance Group of is currently generating about -0.08 per unit of risk. If you would invest  27,890  in Arthur J Gallagher on September 27, 2024 and sell it today you would earn a total of  945.00  from holding Arthur J Gallagher or generate 3.39% return on investment over 90 days.

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

Arthur J Gallagher  vs.  Reinsurance Group of

Arthur J Gallagher

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arthur J Gallagher are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking indicators, Arthur J is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Reinsurance Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reinsurance Group of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Reinsurance 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 Arthur J and Reinsurance Group

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

The idea behind Arthur J Gallagher and Reinsurance Group of 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.