Correlation Between National Western and Erie Indemnity

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

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

Diversification Opportunities for National Western and Erie Indemnity

-0.67

Correlation Coefficient

National Western  Erie Indemnity

Excellent diversification

The 3 months correlation between National and Erie is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding National Western Life and Erie Indemnity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erie Indemnity and National Western 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 Western Life are associated (or correlated) with Erie Indemnity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erie Indemnity has no effect on the direction of National Western i.e., National Western and Erie Indemnity go up and down completely randomly.

Pair Corralation between National Western and Erie Indemnity

If you would invest  49,998  in National Western Life on August 31, 2024 and sell it today you would earn a total of  0.00  from holding National Western Life or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

National Western Life  vs.  Erie Indemnity

National Western Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Western Life has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, National Western is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Erie Indemnity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Erie Indemnity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with National Western and Erie Indemnity

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

The idea behind National Western Life and Erie Indemnity 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .