Correlation Between Erie Indemnity and Alleghany
Can any of the company-specific risk be diversified away by investing in both Erie Indemnity and Alleghany 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 Erie Indemnity and Alleghany into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Erie Indemnity and Alleghany, you can compare the effects of market volatilities on Erie Indemnity and Alleghany 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 Erie Indemnity with a short position of Alleghany. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erie Indemnity and Alleghany.
Diversification Opportunities for Erie Indemnity and Alleghany
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Erie and Alleghany is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Erie Indemnity and Alleghany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alleghany and Erie Indemnity 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 Erie Indemnity are associated (or correlated) with Alleghany. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alleghany has no effect on the direction of Erie Indemnity i.e., Erie Indemnity and Alleghany go up and down completely randomly.
Pair Corralation between Erie Indemnity and Alleghany
If you would invest 38,934 in Erie Indemnity on December 29, 2023 and sell it today you would earn a total of 1,883 from holding Erie Indemnity or generate 4.84% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 4.55% |
Values | Daily Returns |
Erie Indemnity vs. Alleghany
Performance |
Timeline |
Erie Indemnity |
Alleghany |
Risk-Adjusted Performance
0 of 100
Low | High |
Very Weak
Erie Indemnity and Alleghany Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Erie Indemnity and Alleghany
The main advantage of trading using opposite Erie Indemnity and Alleghany positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erie Indemnity position performs unexpectedly, Alleghany 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 Alleghany will offset losses from the drop in Alleghany's long position.Erie Indemnity vs. Reliance Global Group | Erie Indemnity vs. EHealth | Erie Indemnity vs. Fanhua Inc | Erie Indemnity vs. Arthur J Gallagher |
Alleghany vs. Asure Software | Alleghany vs. Beyond Inc | Alleghany vs. Western Digital | Alleghany vs. Getty Copper |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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