Correlation Between National Retail and Selective Insurance

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

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

Diversification Opportunities for National Retail and Selective Insurance

0.53

Correlation Coefficient

National Retail  Selective Insurance

Very weak diversification

The 3 months correlation between National and Selective is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance and National Retail 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 National Retail Properties 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 National Retail i.e., National Retail and Selective Insurance go up and down completely randomly.

Pair Corralation between National Retail and Selective Insurance

Considering the 90-day investment horizon National Retail Properties is expected to under-perform the Selective Insurance. In addition to that, National Retail is 1.19 times more volatile than Selective Insurance Group. It trades about -0.06 of its total potential returns per unit of risk. Selective Insurance Group is currently generating about -0.01 per unit of volatility. If you would invest  10,368  in Selective Insurance Group on January 25, 2024 and sell it today you would lose (54.00) from holding Selective Insurance Group or give up 0.52% of portfolio value over 90 days.

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

National Retail Properties  vs.  Selective Insurance Group

National Retail Prop

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Retail Properties are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, National Retail is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Selective Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with National Retail and Selective Insurance

The main advantage of trading using opposite National Retail and Selective Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Retail 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 National Retail Properties 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.