Correlation Between Reinsurance Group and RenaissanceRe Holdings

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

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

Diversification Opportunities for Reinsurance Group and RenaissanceRe Holdings

0.59

Correlation Coefficient

Reinsurance Group  RenaissanceRe Holdings

Very weak diversification

The 3 months correlation between Reinsurance and RenaissanceRe is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Reinsurance Group of and RenaissanceRe Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RenaissanceRe Holdings and Reinsurance Group 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 Reinsurance Group of are associated (or correlated) with RenaissanceRe Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RenaissanceRe Holdings has no effect on the direction of Reinsurance Group i.e., Reinsurance Group and RenaissanceRe Holdings go up and down completely randomly.

Pair Corralation between Reinsurance Group and RenaissanceRe Holdings

Assuming the 90 days trading horizon Reinsurance Group is expected to generate 1.72 times less return on investment than RenaissanceRe Holdings. But when comparing it to its historical volatility, Reinsurance Group of is 1.0 times less risky than RenaissanceRe Holdings. It trades about 0.01 of its potential returns per unit of risk. RenaissanceRe Holdings is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  23,564  in RenaissanceRe Holdings on September 23, 2024 and sell it today you would earn a total of  236.00  from holding RenaissanceRe Holdings or generate 1.0% return on investment over 90 days.

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

Reinsurance Group of  vs.  RenaissanceRe Holdings

Reinsurance Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reinsurance Group of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Reinsurance Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

RenaissanceRe Holdings

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Reinsurance Group and RenaissanceRe Holdings

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

The idea behind Reinsurance Group of and RenaissanceRe Holdings 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.