Correlation Between CNA Financial and Kemper

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

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

Diversification Opportunities for CNA Financial and Kemper

0.05

Correlation Coefficient

CNA Financial  Kemper

Significant diversification

The 3 months correlation between CNA and Kemper is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding CNA Financial and Kemper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kemper and CNA Financial 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 CNA Financial are associated (or correlated) with Kemper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kemper has no effect on the direction of CNA Financial i.e., CNA Financial and Kemper go up and down completely randomly.

Pair Corralation between CNA Financial and Kemper

Considering the 90-day investment horizon CNA Financial is expected to under-perform the Kemper. But the stock apears to be less risky and, when comparing its historical volatility, CNA Financial is 1.06 times less risky than Kemper. The stock trades about -0.01 of its potential returns per unit of risk. The Kemper is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  6,301  in Kemper on September 2, 2024 and sell it today you would earn a total of  848.00  from holding Kemper or generate 13.46% return on investment over 90 days.

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

CNA Financial  vs.  Kemper

CNA Financial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kemper

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kemper are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Kemper reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CNA Financial and Kemper

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

The idea behind CNA Financial and Kemper 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.