Correlation Between Erie Indemnity and Selectquote

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

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

Diversification Opportunities for Erie Indemnity and Selectquote

-0.06

Correlation Coefficient

Erie Indemnity  Selectquote

Good diversification

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

Pair Corralation between Erie Indemnity and Selectquote

Given the investment horizon of 90 days Erie Indemnity is expected to under-perform the Selectquote. But the stock apears to be less risky and, when comparing its historical volatility, Erie Indemnity is 3.68 times less risky than Selectquote. The stock trades about -0.08 of its potential returns per unit of risk. The Selectquote is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  368.00  in Selectquote on August 31, 2024 and sell it today you would lose (78.00) from holding Selectquote or give up 21.2% of portfolio value over 90 days.

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

Erie Indemnity  vs.  Selectquote

Erie Indemnity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Erie Indemnity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Selectquote

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Selectquote has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Selectquote is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Erie Indemnity and Selectquote

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

The idea behind Erie Indemnity and Selectquote 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.