Correlation Between Selective Insurance and Chubb

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

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

Diversification Opportunities for Selective Insurance and Chubb

-0.05

Correlation Coefficient

Selective Insurance  Chubb

Good diversification

The 3 months correlation between Selective and Chubb is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Selective Insurance Group and Chubb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chubb and Selective 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 Selective Insurance Group are associated (or correlated) with Chubb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chubb has no effect on the direction of Selective Insurance i.e., Selective Insurance and Chubb go up and down completely randomly.

Pair Corralation between Selective Insurance and Chubb

Given the investment horizon of 90 days Selective Insurance Group is expected to generate 1.47 times more return on investment than Chubb. However, Selective Insurance is 1.47 times more volatile than Chubb. It trades about 0.08 of its potential returns per unit of risk. Chubb is currently generating about -0.05 per unit of risk. If you would invest  8,936  in Selective Insurance Group on September 12, 2024 and sell it today you would earn a total of  678.00  from holding Selective Insurance Group or generate 7.59% return on investment over 90 days.

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

Selective Insurance Group  vs.  Chubb

Selective Insurance

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Selective Insurance Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, Selective Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Chubb

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chubb has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Chubb is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Selective Insurance and Chubb

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

The idea behind Selective Insurance Group and Chubb 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 Commodity Directory module to find actively traded commodities issued by global exchanges.