Correlation Between Mercury General and Chubb

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

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

Diversification Opportunities for Mercury General and Chubb

-0.27

Correlation Coefficient

Mercury General  Chubb

Very good diversification

The 3 months correlation between Mercury and Chubb is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Mercury General and Chubb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chubb and Mercury General 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 Mercury General are associated (or correlated) with Chubb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chubb has no effect on the direction of Mercury General i.e., Mercury General and Chubb go up and down completely randomly.

Pair Corralation between Mercury General and Chubb

Considering the 90-day investment horizon Mercury General is expected to generate 1.89 times more return on investment than Chubb. However, Mercury General is 1.89 times more volatile than Chubb. It trades about 0.18 of its potential returns per unit of risk. Chubb is currently generating about -0.06 per unit of risk. If you would invest  5,841  in Mercury General on September 13, 2024 and sell it today you would earn a total of  1,453  from holding Mercury General or generate 24.88% return on investment over 90 days.

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

Mercury General  vs.  Chubb

Mercury General

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mercury General are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Mercury General showed solid returns over the last few months and may actually be approaching a breakup point.

Chubb

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Mercury General and Chubb

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

The idea behind Mercury General and Chubb 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.