Correlation Between Horace Mann and Skyward Specialty

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

By analyzing existing cross correlation between Horace Mann Educators and Skyward Specialty Insurance, you can compare the effects of market volatilities on Horace Mann and Skyward Specialty 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 Horace Mann with a short position of Skyward Specialty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Horace Mann and Skyward Specialty.

Diversification Opportunities for Horace Mann and Skyward Specialty

0.91

Correlation Coefficient

Horace Mann  Skyward Specialty

Almost no diversification

The 3 months correlation between Horace and Skyward is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Horace Mann Educators and Skyward Specialty Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skyward Specialty and Horace Mann 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 Horace Mann Educators are associated (or correlated) with Skyward Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skyward Specialty has no effect on the direction of Horace Mann i.e., Horace Mann and Skyward Specialty go up and down completely randomly.

Pair Corralation between Horace Mann and Skyward Specialty

Considering the 90-day investment horizon Horace Mann is expected to generate 1.84 times less return on investment than Skyward Specialty. But when comparing it to its historical volatility, Horace Mann Educators is 1.08 times less risky than Skyward Specialty. It trades about 0.14 of its potential returns per unit of risk. Skyward Specialty Insurance is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  4,039  in Skyward Specialty Insurance on September 2, 2024 and sell it today you would earn a total of  1,372  from holding Skyward Specialty Insurance or generate 33.97% return on investment over 90 days.

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

Horace Mann Educators  vs.  Skyward Specialty Insurance

Horace Mann Educators

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Horace Mann Educators are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Horace Mann displayed solid returns over the last few months and may actually be approaching a breakup point.

Skyward Specialty

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Skyward Specialty Insurance are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Skyward Specialty exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Horace Mann and Skyward Specialty

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

The idea behind Horace Mann Educators and Skyward Specialty Insurance 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.