Correlation Between Safety Insurance and Atmos Energy

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

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

Diversification Opportunities for Safety Insurance and Atmos Energy

0.84

Correlation Coefficient

Safety Insurance  Atmos Energy

Very poor diversification

The 3 months correlation between Safety and Atmos is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Safety Insurance Group and Atmos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atmos Energy and Safety Insurance 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 Safety Insurance Group are associated (or correlated) with Atmos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atmos Energy has no effect on the direction of Safety Insurance i.e., Safety Insurance and Atmos Energy go up and down completely randomly.

Pair Corralation between Safety Insurance and Atmos Energy

Assuming the 90 days horizon Safety Insurance Group is expected to generate 1.41 times more return on investment than Atmos Energy. However, Safety Insurance is 1.41 times more volatile than Atmos Energy. It trades about 0.11 of its potential returns per unit of risk. Atmos Energy is currently generating about 0.15 per unit of risk. If you would invest  7,070  in Safety Insurance Group on September 25, 2024 and sell it today you would earn a total of  780.00  from holding Safety Insurance Group or generate 11.03% return on investment over 90 days.

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

Safety Insurance Group  vs.  Atmos Energy

Safety Insurance

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Safety Insurance Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Safety Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Atmos Energy

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Atmos Energy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Atmos Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Safety Insurance and Atmos Energy

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

The idea behind Safety Insurance Group and Atmos Energy 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.