Correlation Between HCI and Donegal Group

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

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

Diversification Opportunities for HCI and Donegal Group

0.39

Correlation Coefficient

HCI  Donegal Group

Weak diversification

The 3 months correlation between HCI and Donegal is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding HCI Group and Donegal Group A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Donegal Group A and HCI 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 HCI Group are associated (or correlated) with Donegal Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Donegal Group A has no effect on the direction of HCI i.e., HCI and Donegal Group go up and down completely randomly.

Pair Corralation between HCI and Donegal Group

Considering the 90-day investment horizon HCI Group is expected to generate 1.54 times more return on investment than Donegal Group. However, HCI is 1.54 times more volatile than Donegal Group A. It trades about 0.06 of its potential returns per unit of risk. Donegal Group A is currently generating about 0.06 per unit of risk. If you would invest  8,666  in HCI Group on September 4, 2024 and sell it today you would earn a total of  3,232  from holding HCI Group or generate 37.3% return on investment over 90 days.

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

HCI Group  vs.  Donegal Group A

HCI Group

Risk-Adjusted Performance

10 of 100

OK

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

Donegal Group A

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Donegal Group A are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental indicators, Donegal Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HCI and Donegal Group

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

The idea behind HCI Group and Donegal Group A 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.

Check out your portfolio center.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.