Correlation Between EMC Insurance and CNA Financial

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

Diversification Opportunities for EMC Insurance and CNA Financial

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between EMC and CNA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding EMC Insurance Group and CNA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNA Financial and EMC 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 EMC Insurance Group are associated (or correlated) with CNA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNA Financial has no effect on the direction of EMC Insurance i.e., EMC Insurance and CNA Financial go up and down completely randomly.

Pair Corralation between EMC Insurance and CNA Financial

If you would invest  3,970  in CNA Financial on December 29, 2023 and sell it today you would earn a total of  515.00  from holding CNA Financial or generate 12.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

EMC Insurance Group  vs.  CNA Financial

 Performance 
       Timeline  
EMC Insurance Group 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days EMC Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, EMC Insurance is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.
CNA Financial 

Risk-Adjusted Performance

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Modest
Compared to the overall equity markets, risk-adjusted returns on investments in CNA Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, CNA Financial may actually be approaching a critical reversion point that can send shares even higher in April 2024.

EMC Insurance and CNA Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with EMC Insurance and CNA Financial

The main advantage of trading using opposite EMC Insurance and CNA Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMC Insurance position performs unexpectedly, CNA Financial 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 CNA Financial will offset losses from the drop in CNA Financial's long position.
The idea behind EMC Insurance Group and CNA Financial 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.
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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