Correlation Between RenaissanceRe Holdings and Everest

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

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

Diversification Opportunities for RenaissanceRe Holdings and Everest

0.56

Correlation Coefficient

RenaissanceRe Holdings  Everest

Very weak diversification

The 3 months correlation between RenaissanceRe and Everest is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding RenaissanceRe Holdings and Everest Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everest Group and RenaissanceRe Holdings 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 RenaissanceRe Holdings are associated (or correlated) with Everest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everest Group has no effect on the direction of RenaissanceRe Holdings i.e., RenaissanceRe Holdings and Everest go up and down completely randomly.

Pair Corralation between RenaissanceRe Holdings and Everest

Assuming the 90 days trading horizon RenaissanceRe Holdings is expected to under-perform the Everest. But the preferred stock apears to be less risky and, when comparing its historical volatility, RenaissanceRe Holdings is 2.13 times less risky than Everest. The preferred stock trades about -0.16 of its potential returns per unit of risk. The Everest Group is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  38,314  in Everest Group on September 24, 2024 and sell it today you would lose (2,379) from holding Everest Group or give up 6.21% of portfolio value over 90 days.

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

RenaissanceRe Holdings  vs.  Everest Group

RenaissanceRe Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RenaissanceRe Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Preferred Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Everest Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with RenaissanceRe Holdings and Everest

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

The idea behind RenaissanceRe Holdings and Everest Group 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.