Correlation Between National Reinsurance and Lepanto Consolidated

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

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

Diversification Opportunities for National Reinsurance and Lepanto Consolidated

0.28

Correlation Coefficient

National Reinsurance  Lepanto Consolidated

Modest diversification

The 3 months correlation between National and Lepanto is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding National Reinsurance and Lepanto Consolidated Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lepanto Consolidated and National Reinsurance 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 National Reinsurance are associated (or correlated) with Lepanto Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lepanto Consolidated has no effect on the direction of National Reinsurance i.e., National Reinsurance and Lepanto Consolidated go up and down completely randomly.

Pair Corralation between National Reinsurance and Lepanto Consolidated

Assuming the 90 days trading horizon National Reinsurance is expected to generate 1.66 times more return on investment than Lepanto Consolidated. However, National Reinsurance is 1.66 times more volatile than Lepanto Consolidated Mining. It trades about 0.04 of its potential returns per unit of risk. Lepanto Consolidated Mining is currently generating about -0.01 per unit of risk. If you would invest  58.00  in National Reinsurance on September 24, 2024 and sell it today you would earn a total of  11.00  from holding National Reinsurance or generate 18.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	75.19%
Values	Daily Returns

National Reinsurance  vs.  Lepanto Consolidated Mining

National Reinsurance

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lepanto Consolidated

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lepanto Consolidated Mining are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Lepanto Consolidated exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Reinsurance and Lepanto Consolidated

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

The idea behind National Reinsurance and Lepanto Consolidated Mining 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.