Correlation Between Chubb and Oxbridge

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

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

Diversification Opportunities for Chubb and Oxbridge

-0.46

Correlation Coefficient

Chubb  Oxbridge

Very good diversification

The 3 months correlation between Chubb and Oxbridge is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Chubb and Oxbridge Re Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oxbridge Re Holdings and Chubb 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 Chubb are associated (or correlated) with Oxbridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oxbridge Re Holdings has no effect on the direction of Chubb i.e., Chubb and Oxbridge go up and down completely randomly.

Pair Corralation between Chubb and Oxbridge

Allowing for the 90-day total investment horizon Chubb is expected to under-perform the Oxbridge. But the stock apears to be less risky and, when comparing its historical volatility, Chubb is 7.29 times less risky than Oxbridge. The stock trades about -0.16 of its potential returns per unit of risk. The Oxbridge Re Holdings is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  310.00  in Oxbridge Re Holdings on September 21, 2024 and sell it today you would earn a total of  85.00  from holding Oxbridge Re Holdings or generate 27.42% return on investment over 90 days.

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

Chubb  vs.  Oxbridge Re Holdings

Chubb

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chubb has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Chubb is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Oxbridge Re Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oxbridge Re Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental drivers, Oxbridge reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chubb and Oxbridge

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

The idea behind Chubb and Oxbridge Re Holdings 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.