Correlation Between Lancashire Holdings and Nib Holdings

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

By analyzing existing cross correlation between Lancashire Holdings Limited and nib holdings limited, you can compare the effects of market volatilities on Lancashire Holdings and Nib Holdings 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 Lancashire Holdings with a short position of Nib Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lancashire Holdings and Nib Holdings.

Diversification Opportunities for Lancashire Holdings and Nib Holdings

-0.57

Correlation Coefficient

Lancashire Holdings  Nib Holdings

Excellent diversification

The 3 months correlation between Lancashire and Nib is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Lancashire Holdings Limited and nib holdings limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on nib holdings limited and Lancashire Holdings 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 Lancashire Holdings Limited are associated (or correlated) with Nib Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of nib holdings limited has no effect on the direction of Lancashire Holdings i.e., Lancashire Holdings and Nib Holdings go up and down completely randomly.

Pair Corralation between Lancashire Holdings and Nib Holdings

Assuming the 90 days horizon Lancashire Holdings Limited is expected to generate 0.96 times more return on investment than Nib Holdings. However, Lancashire Holdings Limited is 1.04 times less risky than Nib Holdings. It trades about 0.04 of its potential returns per unit of risk. nib holdings limited is currently generating about -0.02 per unit of risk. If you would invest  584.00  in Lancashire Holdings Limited on September 22, 2024 and sell it today you would earn a total of  197.00  from holding Lancashire Holdings Limited or generate 33.73% return on investment over 90 days.

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

Lancashire Holdings Limited  vs.  nib holdings limited

Lancashire Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lancashire Holdings Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Lancashire Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

nib holdings limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days nib holdings limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Lancashire Holdings and Nib Holdings

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

The idea behind Lancashire Holdings Limited and nib holdings limited 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.