Correlation Between Skyward Specialty and Selective Insurance

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

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

Diversification Opportunities for Skyward Specialty and Selective Insurance

-0.1

Correlation Coefficient

Skyward Specialty  Selective Insurance

Good diversification

The 3 months correlation between Skyward and Selective is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Skyward Specialty Insurance and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance and Skyward Specialty 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 Skyward Specialty Insurance are associated (or correlated) with Selective Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selective Insurance has no effect on the direction of Skyward Specialty i.e., Skyward Specialty and Selective Insurance go up and down completely randomly.

Pair Corralation between Skyward Specialty and Selective Insurance

Given the investment horizon of 90 days Skyward Specialty Insurance is expected to generate 2.64 times more return on investment than Selective Insurance. However, Skyward Specialty is 2.64 times more volatile than Selective Insurance Group. It trades about 0.24 of its potential returns per unit of risk. Selective Insurance Group is currently generating about 0.09 per unit of risk. If you would invest  4,039  in Skyward Specialty Insurance on September 2, 2024 and sell it today you would earn a total of  1,372  from holding Skyward Specialty Insurance or generate 33.97% return on investment over 90 days.

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

Skyward Specialty Insurance  vs.  Selective Insurance Group

Skyward Specialty

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Skyward Specialty Insurance are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Skyward Specialty exhibited solid returns over the last few months and may actually be approaching a breakup point.

Selective Insurance

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Selective Insurance Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, Selective Insurance is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Skyward Specialty and Selective Insurance

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

The idea behind Skyward Specialty Insurance and Selective Insurance 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.