Correlation Between Chubb and Fednat Holding

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Can any of the company-specific risk be diversified away by investing in both Chubb and Fednat Holding 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 Chubb and Fednat Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chubb and Fednat Holding Co, you can compare the effects of market volatilities on Chubb and Fednat Holding 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 Chubb with a short position of Fednat Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chubb and Fednat Holding.

Diversification Opportunities for Chubb and Fednat Holding

-0.59
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Chubb and Fednat is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Chubb and Fednat Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fednat Holding and Chubb 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 Chubb are associated (or correlated) with Fednat Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fednat Holding has no effect on the direction of Chubb i.e., Chubb and Fednat Holding go up and down completely randomly.

Pair Corralation between Chubb and Fednat Holding

If you would invest  25,403  in Chubb on December 29, 2023 and sell it today you would earn a total of  447.00  from holding Chubb or generate 1.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy4.55%
ValuesDaily Returns

Chubb  vs.  Fednat Holding Co

 Performance 
       Timeline  
Chubb 

Risk-Adjusted Performance

23 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Chubb are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Chubb sustained solid returns over the last few months and may actually be approaching a breakup point.
Fednat Holding 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Fednat Holding Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Fednat Holding is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Chubb and Fednat Holding Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chubb and Fednat Holding

The main advantage of trading using opposite Chubb and Fednat Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chubb position performs unexpectedly, Fednat Holding 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 Fednat Holding will offset losses from the drop in Fednat Holding's long position.
The idea behind Chubb and Fednat Holding Co 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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