Correlation Between EMPLOYERS HLDGS and Lancashire Holdings

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

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

Diversification Opportunities for EMPLOYERS HLDGS and Lancashire Holdings

0.43

Correlation Coefficient

EMPLOYERS HLDGS  Lancashire Holdings

Very weak diversification

The 3 months correlation between EMPLOYERS and Lancashire is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding EMPLOYERS HLDGS DL and Lancashire Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lancashire Holdings and EMPLOYERS HLDGS 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 EMPLOYERS HLDGS DL are associated (or correlated) with Lancashire Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lancashire Holdings has no effect on the direction of EMPLOYERS HLDGS i.e., EMPLOYERS HLDGS and Lancashire Holdings go up and down completely randomly.

Pair Corralation between EMPLOYERS HLDGS and Lancashire Holdings

Assuming the 90 days horizon EMPLOYERS HLDGS DL is expected to generate 0.66 times more return on investment than Lancashire Holdings. However, EMPLOYERS HLDGS DL is 1.51 times less risky than Lancashire Holdings. It trades about 0.14 of its potential returns per unit of risk. Lancashire Holdings Limited is currently generating about 0.02 per unit of risk. If you would invest  4,195  in EMPLOYERS HLDGS DL on September 22, 2024 and sell it today you would earn a total of  665.00  from holding EMPLOYERS HLDGS DL or generate 15.85% return on investment over 90 days.

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

EMPLOYERS HLDGS DL  vs.  Lancashire Holdings Limited

EMPLOYERS HLDGS DL

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EMPLOYERS HLDGS DL are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, EMPLOYERS HLDGS reported solid returns over the last few months and may actually be approaching a breakup point.

Lancashire Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lancashire Holdings Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Lancashire Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with EMPLOYERS HLDGS and Lancashire Holdings

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

The idea behind EMPLOYERS HLDGS DL and Lancashire Holdings Limited 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.