Correlation Between RLI Corp and SPACE

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

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

Diversification Opportunities for RLI Corp and SPACE

0.82

Correlation Coefficient

RLI Corp  SPACE

Very poor diversification

The 3 months correlation between RLI and SPACE is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding RLI Corp and SPACE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPACE and RLI Corp 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 RLI Corp are associated (or correlated) with SPACE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPACE has no effect on the direction of RLI Corp i.e., RLI Corp and SPACE go up and down completely randomly.

Pair Corralation between RLI Corp and SPACE

Considering the 90-day investment horizon RLI Corp is expected to generate 4.66 times less return on investment than SPACE. But when comparing it to its historical volatility, RLI Corp is 3.57 times less risky than SPACE. It trades about 0.17 of its potential returns per unit of risk. SPACE is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  32.00  in SPACE on September 4, 2024 and sell it today you would earn a total of  27.00  from holding SPACE or generate 84.38% return on investment over 90 days.

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

RLI Corp  vs.  SPACE

RLI Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RLI Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak essential indicators, RLI Corp demonstrated solid returns over the last few months and may actually be approaching a breakup point.

SPACE

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPACE are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SPACE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RLI Corp and SPACE

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

The idea behind RLI Corp and SPACE 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.